COMMITTEE ON WAYS AND MEANS BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois E. CLAY SHAW, Jr., Florida NANCY L. JOHNSON, Connecticut AMO HOUGHTON, New York WALLY HERGER, California JIM MCCRERY, Louisiana DAVE CAMP, Michigan JIM RAMSTAD, Minnesota JIM NUSSLE, Iowa SAM JOHNSON, Texas JENNIFER DUNN, Washington MAC COLLINS, Georgia ROB PORTMAN, Ohio PHIL ENGLISH, Pennsylvania WES WATKINS, Oklahoma J. D. HAYWORTH, Arizona JERRY WELLER, Illinois KENNY C. HULSHOF, Missouri SCOTT MCINNIS, Colorado RON LEWIS, Kentucky MARK FOLEY, Florida KEVIN BRADY, Texas PAUL RYAN, Wisconsin	CHARLES B. RANGEL, New York FORTNEY PETE STARK, California ROBERT T. MATSUI, California WILLIAM J. COYNE, Pennsylvania SANDER M. LEVIN, Michigan BENJAMIN L. CARDIN, Maryland JIM MCDERMOTT, Washington GERALD D. KLECZKA, Wisconsin JOHN LEWIS, Georgia RICHARD E. NEAL, Massachusetts MICHAEL R. MCNULTY, New York WILLIAM J. JEFFERSON, Louisiana JOHN S. TANNER, Tennessee XAVIER BECERRA, California KAREN L. THURMAN, Florida LLOYD DOGGETT, Texas EARL POMEROY, North Dakota
Allison Giles, Chief of Staff Janice Mays, Minority Chief Counsel
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined.

Advisory of February 28, 2001, announcing the hearing

Office of United States Trade Representative, Hon. Robert B. Zoellick

SUBMISSIONS FOR THE RECORD

American Forest & Paper Association, statement

Advanced Medical Technology Association, statement

American Textile Manufacturers Institute, statement

Florida Department of Agriculture & Consumer Services, Tallahassee, FL, Terry L. Rhodes, statement

Matel Inc., El Segundo, CA, and St.Maxens & Company, Thomas F. St.Maxens, statement

National Conference of State Legislatures, and International Trade Committee, Bill Friend, letter and attachments

National Electrical Manufacturers Association, Rosslyn, VA, statement

Ranchers-Cattleman Action Legal Fund, Billings, MT, statement

House of Representatives,
Committee on Ways and Means
Washington, DC.

The Committee met, pursuant to notice, at 11:00 a.m., in room 1100 Longworth House Office Building, Hon. Bill Thomas [Chairman of the Committee] presiding.

[The advisory announcing the hearing follows:]

Chairman THOMAS. This is a hearing of the Ways and Means Committee to examine another essential component of the President's economic plan, and that is reclaiming United States' leadership in world trade. As we know, the United States is the world's greatest exporter, but it is falling behind, frankly, in negotiating trade agreements and setting the agenda for rules for international commerce in the new century.

International competitiveness is not just, however trade agreements and rules. The Committee also recognizes that other areas of this committee's jurisdiction affect our ability to compete. Workers, business and farmers run up against a long list of outdated and frankly damaging disincentives that are currently in the tax code, that impede our success in foreign markets.

Time is running out here, as well, to make changes. So I want to welcome Ambassador Robert Zoellick in his first appearance in Congress since his unanimous confirmation last month by the United States Senate. Trade promotion authority will be crucial for this administration as you prepare to negotiate closer trading relationships, Mr. Ambassador, not just within this hemisphere, but globally.

I look forward to hearing your plans for following through on the free trade agreement of the Americas, launching a new round of negotiations in the World Trade Organization, and bilateral trade agreement with Vietnam, among others. Together we need to also consider the Andean Trade Preference Act, but I look forward also to hearing from my Democratic colleagues as to how they want to see trade promotion authority evolve.

We have gotten to the point now where it is just not sufficient to point with pride or view with alarm. We have to be specific about our concerns as to how we want to make changes, to move ahead on a bipartisan basis. We have got a lot of work ahead of us to regain our historic position in the international marketplace. This is an area that historically this committee has worked very positively and successfully in a bipartisan fashion.

In view of the ambassador's time, in which he has about two hours in front of this committee, I would request that all members who wish to make opening statements could submit them in writing, save for the chairman, the ranking member, the chairman of the Trade Committee, and the ranking member of the Trade Committee. So at this time, to conclude the chairman's opening statement, I would yield to the chairman of the Trade Subcommittee, the gentlemen from Illinois, Mr. Crane.

[The opening statement of Chairman Thomas follows:]

Mr. CRANE. Thank you, Mr. Chairman, and I too want to welcome our new and impressive U.S. trade Representative, Bob Zoellick, and we look forward to working with you. I would rather get to the questions rather than make an extended opening remark, except to say that I think we have a unique opportunity historically. For the first time in all the years I have served in Congress, I think we can advance a free trade agenda that is in our national interest and the world's interest, too, and that you will play an instrumental role in that.

Let me ask you first, you mentioned in your confirmation--

Chairman THOMAS. If I could allow the gentleman from Illinois--and then I would turn to you.

Mr. CRANE. I am sorry. Let me yield to Charlie.

[The opening statement of Mr. Crane follows:]

Chairman THOMAS. The gentleman from New York, opening statement?

Mr. RANGEL. Thank you, Mr. Chairman. Ambassador, let me join the chairman and others in welcoming you to the Committee and congratulating you for the unanimous support that you received in the Senate. You bring many great skills to this job, and this is one committee that appreciates the need for America to continue to find new markets and expand our trade if we are going to continue to enjoy the economic prosperity that we have today. While not all Americans are able to enjoy it, we do know that we just have to increase the size of the pie in order for more people to be able to participate.

We know that there is no Democratic way and no Republican way for us to expand our markets, and so we want you to know that this is one committee from which you should be able to enjoy bipartisan support. The President has gone out of his way to expound how important it is to him that the Congress act in a bipartisan way. Clearly the Congress has struck out on the question of tax relief, but we do get another chance to come up to bat on the question of trade.

So I look forward to working with you, and I would like to yield to my dear friend and the ranking member of the Trade Subcommittee that you will be working closely with, Sandy Levin.

Mr. LEVIN. Thank you, Mr. Rangel and Mr. Chairman and Mr. Crane and colleagues on the Committee. Let me just say a few words of a more general nature so we can focus on your testimony and Q and A. So, Mr. Ambassador, welcome. Your prepared testimony describes the benefit of trade in clear terms, and I agree that trade is an essential agreement in American economic expansion.

That said, said, I do not think the main challenge before us is just how to sell the benefits of economic globalization. A basic issue is whether we believe that economic globalization, which is indeed here to stay, needs to be shaped or whether we just embrace it blindly on the presumption that it will work out on its own without any problems. Put another way, the distinction is between those two view trade liberalization as an end in and of itself, and those who, like myself, view it is a key tool with the need to shape trade policies themselves so that they maximize the benefits and minimize the downsides of international trade.

Over the last 18 months, we took the latter approach, the approach of shaping globalization. As a result, we broke the deadlock of more than four years, and in that way the Nation did indeed show leadership on issues of world trade. In CBI, for example, we found ways to enhance the competitiveness position of industries in the Western Hemisphere through complementarities of capital and labor, and enhance the labor standards in CBI.

In China, for example, we were concerned that the nonmarket structures in China's economy could well lead to overproduction that could cause agricultural and industrial products to surge into the U.S. market. So we crafted the toughest safeguard ever written into U.S. law. Each of these solutions was a building block. Each addressed a specific problem and built some confidence that we could solve the next one.

This morning and in the coming weeks the challenge is whether we will continue on the path of innovatively shaping globalization and creating new building blocks. I believe there are real opportunities to move forward. To pass the Jordan free trade agreement in time for the visit of King Abdullah next month, to address the labor dimensions of the Vietnam trade agreement and pass it this summer, and to come up with a meaningful response to the crisis in steel.

With these building blocks in place, I believe we could then get to work on other issues, including how to address negotiating objectives, consultative procedures and the approval mechanisms of fast-track. We will welcome today and in the future active discussion with you, and I hope work on specific topics. In this regard you refer in your prepared statement to the importance of the congressional-executive partnership, but as Mr. Rangel mentioned, that welcome result will occur only if there is an early and genuine effort not to, as you phrase it, and I quote, get mired down in partisan division.

Thank you.

[The opening statement of Mr. Levin follows:]

[The opening statements of Mr. Shaw, and Mr. Ramstad follow:]

Chairman THOMAS. I thank the gentleman, and now it is my pleasure to ask the ambassador that any written statement that he may have will be placed in the record, and you can address us in any fashion you see fit.

Mr. Zoellick, welcome to the Ways and Means Committee.

STATEMENT OF THE HON. ROBERT B. ZOELLICK, UNITED STATES TRADE REPRESENTATIVE

Ambassador ZOELLICK. Thank you, Mr. Chairman. And, thank you, Mr. Rangel and Chairman Crane, and Mr. Levin. I appreciate the opportunity to be here. What I would like to do, Mr. Chairman, is, as you mentioned, if you put my full statement in the record, I will just summarize it.

Last week, President Bush spoke before a joint session of Congress about how trade is part of his larger vision of expanding freedom. Trade policy is the bridge between the President's international and domestic agendas. As the former Governor of a border State, President Bush has seen that the free exchange of goods and services sparks economic growth, opportunity, dynamism, fresh ideas, and democratic values, both at home and abroad.

In undertaking the President's charge, I know well that the Constitution vests the Congress with the authority to regulate commerce with foreign nations. Frequent substantive consultation with this committee is enormously important to me, and I look forward to working closely with you. The history books recount economic, political and indeed national dangers of a breakdown in America's trade policy.

The disastrous experience of setting protectionist tariffs for over 20,000 individual items in the Smoot-Hawley bill of 1930 led the Congress four years later to try a different approach, a bipartisan partnership with the executive to try to negotiate lower barriers to trade around the world. This partnership between the Congress and the executive became a bipartisan cause and eventually produced prosperity and opportunity, and even liberty beyond the greatest expectations of its supporters.

Federal Reserve Chairman Alan Greenspan has put this success in historical perspective, by pointing out that the growth in trade as a share of the world economy over the past 50 years has finally managed to reverse the losses from the calamities of the early 20th-century and now approximates globalization around 1900.

So today, just like Americans at the turn of the last century, we face some critical decisions about the future course for our country, trade and the world. Just as the World War II generation forged a bipartisan consensus that sustained successful trade expansion through the Cold War, we must build a new consensus, to promote open markets and trade for decades to come. I know that new ideas are being advanced from many quarters and I want to work with you with an open mind to try to mobilize broad support for freer trade.

I am sure we will have many opportunities, including I expect today, to discuss the import particulars of trade, but I would like to step back just a moment to touch on the importance of global trade for the American people. First, expanded trade, imports as well as exports, improves the well-being of Americans. It leads to better jobs with bigger paychecks and more competitive businesses, as well as more choices as the goods and imports with lower prices for hard-working families and hard-driving entrepreneurs.

I appreciate that votes for agreements like NAFTA and the Uruguay Round may not have been easy to cast, yet those agreements contributed to the longest period of economic growth in U.S. history, with levels of full employment and without inflationary pressures, beyond the forecast of any economist. A new commitment to trade liberalization can help boost a vigorous, long-term economic recovery from the present slowdown.

The expanding global trade and the expanding economic growth in the United States are not coincidental. They are achieved in concert. One strengthens and reinforces the other. Moreover restrictions on trade have victims: farmers; schoolteachers; factory and office workers; small businesspeople and many others who have to pay more for clothing or food or homes or equipment because of visible and invisible taxes on trade.

Second, as President Bush has stated, free trade is about freedom. Economic freedom creates habits of liberty and habits of liberty create expectations of democracy. President Bush recently made an historic visit to Mexico where he met President Fox, the first president elected from the opposition since that nation's revolution, and it is not an accident in my view that after Mexico embraced the opening of its economic system as embodied in NAFTA, it was drawn to a democratic opening as well. So trade can promote our values as well as our economic interest.

Third, expanded trade affects our Nation's security. The crises of the first 45 years of the last century were inextricably linked with hostile protectionism and national socialism. Take an example from today: Columbia is waging a battle to defend the rule of law against murderers who finance their terror through complicity in drug trafficking. President Prastrana, when he visited Washington recently, has said that one way to counter this threat would be for Congress to renew the Andean Trade Preferences Act, which expires in December. With a renewed and robust Andean Trade Preferences Act, the emphasis of U.S.-Colombia relations can gradually shift from aid to trade.

I recognize, however, that the benefits of open trade can only be achieved if we achieve public support at home. To do so, the administration must enforce vigorously and with dispatch our trade laws against unfair practices. In a world of global economics, justice delayed can become justice denied. We need to do a better job of monitoring compliance with trade agreements and insisting on performance by our trading partners, and I assure you that I will not hesitate to use the full power of U.S. and international law to defend American businesses and workers against unfair trading practices.

Even if we do our jobs well, I appreciate that change, particularly rapid adjustments from whatever cause, can be very difficult and frightening for hard-working people. So part of our larger program will have to be to help people to adapt and adjust and benefit from change.

To strengthen and speed America's trade and economic policies, we are going to need to reestablish the bipartisan congressional-executive negotiating partnership. Last week, the President asked the Congress for quick action to give him, quote, "the strong hand of Presidential trade promotion authority." This authority, as he pointed out, has been given to five previous Presidents. Therefore I will be following up with this committee and with the Senate Finance Committee to consider how to establish trade promotion authority for the President based on the fast-track precedent and the broadest possible support.

In the absence of this authority, other countries have been moving forward with trade agreements while America has stalled. Indeed, other countries are writing the rules of the international trading system as they negotiate without us. The European Union has free trade agreements with 27 countries; 20 of these agreements have been signed since 1990. Japan is negotiating a free trade agreement with Singapore. It is also exploring agreements with Mexico and Korea and Chile.

There are approximately 130 free trade agreements in the world globally, but the United States is party to only two. Our deadlock hurts American businesses, workers and farmers, and they are going to find themselves shut out of many preferential trade agreements and investment agreements negotiated by others. Just to cite one example, while U.S. exports to Chile face an eight percent tariff, the Canada-Chile trade agreement will free Canadian imports of this duty, and that is why we are going to start our negotiations again with Chile on a free trade agreement this month.

We cannot afford to stand still or be mired in partisan division while other nations seize the mantle of leadership from the United States. This would be a huge missed opportunity; indeed, in my view, a historic mistake. In considering the grant of trade promotion authority, I urge you to give the President more leverage by broadening our options.

I would like to be able to tell my counterparts from around the world that we are willing to negotiate if they are serious about eliminating barriers, yet also make clear that America will look elsewhere if they delay, and that the United States will move forward and it is up to them to decide to join us or be left behind. The fact that we are moving on multiple fronts increases our leverage.

On April 20th, President Bush will attend the Summit of the Americas meetings in Quebec city, where one of the major items on the agenda will be the free trade area of the Americas, and he has emphasized to set a new course for this hemisphere, he needs to hold out the prospect in Quebec city that new trade promotion authority is on its way.

Of course, America's trade and economic interests extend far beyond this hemisphere. We want to launch a new round of global trade negotiations in the WTO, emphasizing a key role for agriculture. We will seek to negotiate regional and bilateral agreements to open markets around the world. There are opportunities in the Asia-Pacific. We will start with a free trade agreement with Singapore, and work with you to pass the basic trade agreement with Vietnam, negotiated by the Clinton administration.

We will urge Japan to deregulate, restructure and open its economy, which is long, long overdue, and we want to complete China's accession to the WTO, once it meets its requirements. Further reforms in the Middle East and Africa need our encouragement and I compliment this Committee on its important work with Africa and the Caribbean last year. We are committed to working with Congress to enact legislation for a free trade agreement with Jordan, to implement the Africa and Caribbean provisions, and to consider other ways we can help both these regions.

As India reforms its economy and taps its great potential, we should explore ways to try to achieve mutual benefits, to help developing nations appreciate that globalization and open markets can assist in their own efforts to reform and grow. We will need to extend the legislation authorizing the Generalized System of Preferences program. Of vital importance, I will seek to work with the European Union and its candidate members in central and eastern Europe, both to fulfill the promise of a trans-Atlantic marketplace that is already being created by business investment and trade, as well as to reinvigorate, improve and strengthen the WTO processes.

Now that there is a fragile peace in the Balkans, we must secure it by pointing people toward economic hope and regional integration. Therefore, we would like to work with the Congress to follow through on the prior administration's proposal to offer trade preferences to countries in southeast Europe.

The Bush administration has an ambitious trade agenda, reflecting the importance that President Bush assigns to trade. This is an opportune moment to reassert America's leadership in setting trade policy and to build a post-Cold War world on the cornerstones of freedom, democratic values, open trade and free markets, as well as security.

I appreciate the executive-congressional partnership on trade has a rich tradition which has produced very important results, and with your help I look forward to working with you to build on that partnership as we move ahead.

Thank you.

[The prepared statement of Mr. Zoellick follows:]

Chairman THOMAS. Thank you very much, Mr. Ambassador, and I know you have limited time and I hope members will appreciate that this will not be the only visit that we will have with the Ambassador, but it is the first. Let me begin the questioning by telling you that a number of prominent people involved in trade, even someone as prominent as the former United States Trade Representative, have indicated that given the fact we have been able to negotiate something like the China agreement, that perhaps what we used to call fast-track, now we call trade promotion authority, may not be only not as important as we thought, but not necessary to place in the hands of the President.

I will do my best as we have these discussions to not drift off into jargon, and that those who are watching us can follow us, because we used to have something called most favored nation, which made no sense, because in fact what it was, was normal permanent trade relations, and we have been able to conquer that terminology problem. I do support the idea that instead of calling it fast-track, we call it trade promotion authority; but frankly, rather than worry about what it is called, what do you think about whether we need it or not, Mr. Ambassador?

Ambassador ZOELLICK. Well, thank you, Mr. Chairman. I have great respect for Ambassador Barshefsky and I know she worked very closely and effectively with this committee.

Chairman THOMAS. As do we all.

Ambassador ZOELLICK. I think, at the forum that she spoke, she was the only one of about five or six former U.S. Trade Representatives that had that view; and I personally feel that what it might have overlooked is that the work that this committee and the Congress very effectively did were agreements that tended to be one-sided. Bringing China into the PNTR involved a series of concessions by China. We did not make any trade adjustments.

The Caribbean and Africa bills involved preferential arrangements which I compliment the liberalization, but we did not make any adjustments. I suspect that as we face the larger agreements on our agenda, particularly the Free Trade Area of the Americas or the WTO process, that this is going to involve some give, as well as some take. I think for a larger agreement, it will be very important to be able to have this authority for those processes.

Chairman THOMAS. I thank the gentlemen. I also happen to believe that if we are going to try to re-establish trade promotion authority, that there has to be a way in which we can deal with the 21st century questions of trade, along with labor and the environment, but frankly it is going to require us to be a bit more creative than we have been in the past; and my question to you would be do you feel comfortable with the suggestions that have been offered already in terms of trade and the environment? Is there sufficient specificity or, rather than simply pointing with pride or viewing with alarm, do we need to get much more serious with those of us who are focusing on trade in trying to create an agreement with those who are also focusing on labor and the environment? How specific have the proposals been that you have seen in terms of trying to advance all of our interests with the new trade promotion authority?

Ambassador ZOELLICK. Well, first, Mr. Chairman, obviously both for you and many members of this committee, the trade and environment and labor issue is going to be a critical one going forward. So let me start with the guidance of President Bush on this. He has said of course we want to try to improve environment and labor conditions, we just do not want to do so in any way that is protectionist.

As I said in my statement, I want to try to broaden the base of support for trade in a bipartisan fashion and that will clearly include this issue. Now, there have been a host of ideas out there. This committee and the Congress as a whole took one approach with the Africa-CBI bills, which involved at least the labor issue.

I have been trying to consult with people in both the Senate and the House. Some are interested in the increased role that the ILO can play, the International Labor Organization. Some have talked about financial arrangements, including with the multi-development banks.

I know that another issue would be the interconnection of environment agreements, for example, the SITIES agreement, with endangered species, with the WTO system, and I think that is a reasonable question to ask. I have talked with Mr. Levin about the Cambodia provisions, which are ones that are designed to be incentives as opposed to disincentives, and obviously other countries have explored other methods, like the monetary penalties that are in the Chilean and Canadian agreement.

At this point I think there are a number of ideas on the table, but I certainly welcome more. Mr. Levin gave a speech yesterday where he put out some specific ideas on that. As I mentioned to him that while I did not agree with all of the speech, I thought it was a very thoughtful presentation on an important set of issues. So I believe that, in terms of specificity, that from this committee, but also frankly from others--I have talked with environmental groups; I have met with John Sweeney--that I would like to try to see a variety of ideas because I do not believe the one-size-fits-all. I think we are going to have to approach this differently in different circumstances, and what I would particularly appreciate is that as we try to figure out how to build a base of support in this country, we also look at how we do it abroad, because part of the challenge here is going to be bringing other countries to accept these ideas, and frankly there is a lot of fear and anxiety out there.

So I think as long as we approach this in a spirit where our purpose is open markets, economic growth, helping countries to move to a win-win situation, whether with side agreements or other dimensions, we will be more successful in going where we all want to go, which is to try to increase economic growth, but also do so in a way that improves labor and environmental conditions.

Chairman THOMAS. Thank you very much, Mr. Ambassador.

Does my friend, the ranking member from New York, wish to inquire?

Mr. RANGEL. Thank you, Mr. Chairman. Once again, I really look forward to working with you. For so much of my life, trade has just meant Europe, and I feel so excited that I am living in a time when America's concern goes beyond that. It goes to Mexico, Central and South America, the Caribbean and Africa. To African-Americans and to other people, this is such a healthy feeling because it means that we are the only country on the face of the earth that has color and cultural attachments to all countries; and so I hope the State Department and your office will make certain that we have the talent there to provide the best support and the best ambassadors, if you will, that we can get, to take into consideration all that we have to offer.

I do hope, as it relates to the Caribbean and to Africa, that we not just rely on formal treaty agreements, but you are able to put together a task force to see what some of us in Congress that sit on different committees can do with the Ex-Im Bank, that can do with inviting capital to these countries, that can do in providing assistance as it relates to quality health care, because no one has done more than former Secretary of Commerce Ron Brown to make it clear that if you want good training friends, you have to be a friend, to assist people and get in the economy and having disposable income.

So you have made one great first impression with colleagues on both sides of the aisle, and I look forward to working with you and your task force to see what support we can give you to make this a greater and more prosperous country.

Thank you.

Chairman THOMAS. Thank the gentlemen. Does the chairman of the Trade Subcommittee, the gentlemen from Illinois, wish to inquire?

Mr. CRANE. Yes. Thank you, Mr. Chairman.

Mr. Ambassador, you mentioned in your confirmation testimony that you would consider negotiating bilateral trade agreements as a means of advancing the WTO discussions, and I have supported for some time negotiations with Chile and with Singapore, Australia and New Zealand. I am wondering if you had any discussions, or this administration, with Australia and New Zealand to lay the groundwork for free trade negotiations with those two close allies.

Ambassador ZOELLICK. Mr. Chairman, I have had some informal discussions with various Australians who I have had the pleasure of knowing over the course of the past 15 years. I think there is a growing interest in a trade agreement with Australia. I will tell you one point that I am trying to be careful about with this. In 1992, I wrote a document for President Bush, Number 41, about an economic plan that included a free trade agreement with Australia, and it got caught up in Australian politics at the time.

So I have said to my friends in both the Labor party and the national coalition, since they are facing election, that if we approach this, I want to make sure it is done in a fashion that has bipartisan support in Australia. I will be meeting the Australian trade minister in the coming weeks. I hope that will be the case, because I certainly do not want to get caught up in the midst of their election campaign; but it is a subject I would like to discuss further, also with this committee, because we will have some sensitive issues if we are going to go down that route.

As for the New Zealanders, I have not yet had a conversation with them. Based on this exchange, I expect I will.

Mr. CRANE. The upcoming April summit among 34 leaders of the western hemisphere marks an important opportunity to advance free trade in the region, and given the sizable amount of work that remains to be done to conclude an FTAA and seeming reluctance by some key partners, what will the United States do at the summit to rejuvenate FTAA negotiations?

Ambassador ZOELLICK. Well, first, Mr. Chairman, I would like to put this in a context that I think is important. I really do see this as a historic opportunity. Some of you that have a strong sense of the history of this institution probably know that Henry Clay and others had been promoting this notion of free trade throughout the Americas for well over 150 years, and we have not been able to get it done.

Senator Blaine, I think, also was an early proponent of this. So this really is something that could be an incredible success story for the Congress and the executive going forward. It is, in my view, as I said, not only about economics, but it is about securing democracy. These countries have come a tremendous way since the time I dealt with them at the Treasury Department in the 1980s, but frankly they are at a little point of reform fatigue now, and they need this incentive to try to keep moving.

As you probably know, we have completed nine bracketed texts to move the negotiation forward, and these deal with topics like market access and agricultural and services, and now we have got to begin the hard work of setting the timetable, and that is, I think, one of the purposes of the ministerial and the summit, to try to march forward with this.

The early statements by the countries of the Americas were to try to complete this by January 1, 2005. I would be delighted if it could enter into force before that. We will have to see how that works in terms of negotiating with our fellow countries. There is one other point on this I think is important, given this committee's broader range of interest.

We know that there are some economic difficulties in the world at present, and these always reflect themselves in financial markets. What I have said to my Latin American colleagues is what greater signal of confidence in the future of Latin America, which will be important for investors, than moving this agreement forward. So I hope that is one of the effects we can have come out of the Summit of the Americas.

Mr. CRANE. Finally, the five-year U.S.-Canada softwood lumber agreement imposes a tariff rate quota on all softwood lumber imported from Canada. It is scheduled to expire on March 31 of this year--March 31, this month. Proponents of trade barriers have made allegations of Canadian softwood subsidies, but this has been disputed. Do you agree that the quotas penalize consumers and, in this instance, potential homebuyers in the United States by increasing the price of lumber?

Ambassador ZOELLICK. Well, Mr. Chairman, as someone who actually spent a fair amount of his professional life in the affordable housing industry, I have a pretty good sense of that field. I have to honestly tell you I think with lumber prices right now, that is not their problem. I think that this is a field where I have certainly heard loud and clear from many members of the Congress about their larger concerns.

I think there has been a past practice of subsidies in Canada, and it is one of the issues we will need to deal with. Since the red light is on, I suspect I will get this question to follow-up on.

Mr. CRANE. Thank you, Mr. Ambassador.

Chairman THOMAS. Thank both of you for your cooperation.

Does the ranking member of the Trade Subcommittee, the gentlemen from Michigan, wish to inquire?

Mr. LEVIN. Thank you. I will not talk to you about softwood. I think your answer to Mr. Crane was interesting and revealing, because I think there is a real problem there. Let me just say a word. In your testimony, you talk about reasserting America's leadership in trade, and I know every new administration has a tendency to kind of upgrade its devotion and somewhat diminish that of its predecessor.

I just want to say I do think under the previous administration, surely in the last 18 months, there was very substantial progress, and I think in part because it was willing to tackle some of the tough issues that have been often intractable. You say in here, referring to what other countries are doing, that we may be losing ground. I just would urge that we not overstate that; but in that regard, you talk about the small number of FTAs that the U.S. has entered into. So let me, if I might, be a bit specific.

We negotiate an agreement with Jordan. We completed it. Will it be submitted here before King Abdullah arrives, so we can act on it?

Ambassador ZOELLICK. Well, let me answer your first point. I certainly think the Clinton administration had a number of significant accomplishments, and I have supported them, frankly, in terms of the NAFTA and the Uruguay Round effort. I do think there was a problem after that and I think it is important we face up to the fact that after 1994, the agenda slowed considerably, and I do not dismiss any of the work by the people in the offices, but I think that relied heavily on the fact that the President no longer had the negotiating authority that I think we need.

I certainly take your point that the work over the last 18 months was important work, and, as I mentioned, that work was of a special type in terms of preferential legislation and legislation to bring China to WTO, that is different than some of the traditional trade negotiations. So I do continue to believe that if we are going to move forward and not fall behind, and I just have to say respectfully Mr. Levin when I talk to people in the business community and what I have seen economically, we do run that risk, that we are going to have to address that issue.

Now, to Jordan. I obviously believe that this is a very important agreement and I think it has a number of creative dimensions. Obviously, when the King comes, he is going to be pressing it forward. Just so you know, I have had communication just through one other person to Prime Minister Sharon to ensure he would support an agreement, and I have been told that he supports the agreement; and I think its significance is in part not only due to the volatility in the Middle East, but the fact that you have a King who is trying to bring his country in the right economic direction, and we need to try to encourage that as a signal to others in terms of the reform process.

In terms of the timing, when I have spoken with you, I obviously know the priority you place on this one. When I have spoken to others, including, frankly, on the Democratic side, I hear a priority of Vietnam. I have mentioned in my statement the importance of some of the other issues; for example, the Andean Trade Preferences with President Pastrana coming and the fact that that expires. There are others related to the Balkans, given the sense, as understand it, the prior administration proposed that legislation in 1999, and it was unable to move.

So one of the issues that I frankly am going to want to consult with this committee and others on is how we do all of these agreements, recognizing, and you would know this better than I do, that trade agreements are not so easy for the Congress to take up one by one by one. So one issue is, frankly, how do we handle the agenda that I have tried to lay out in my testimony here? Clearly, Jordan needs to be an important part of that.

Mr. LEVIN. Let me just quickly say I think the only controversy about Jordan is among a few--I think a few--who have objected to the labor provisions and the environmental provisions that Jordan voluntarily entered into. I would hope it would be sent up and it would not be used as vote bait for other issues. I do not think that will work. It is a sound agreement in and of itself.

Secondly, quickly on steel, a number of us have been doing some work on it, and I am going to be sending a letter to the administration with a lot of the details about the surges, the imports, product by product, and urging a 201 action. Can you quickly tell us where you are on this?

Ambassador ZOELLICK. Yes. Just on your first point, with respect to saying that it only has a labor and an environment issue that some people disagree with, that is a big issue up here, and I have certainly got that sense from talking to people on both sides of the aisle, the recognition. So, as you know, I would like to work with you on that issue and we can talk more about the specifics of the agreement. I think that it is a very creatively drafted agreement. I have some concerns about the sanction provisions, but I do not think I can just say--well, to be honest with you, we can just sort of move that one past. I think we are going to have to discuss this in the context of others. But I assure you, Mr. Levin, I would like to move all of these as quickly as we can. We just have to try to see how we can resolve those.

Mr. LEVIN. If we try to package everything, we will do nothing. Quickly about steel then.

Ambassador ZOELLICK. Yes, on steel, as you and I have discussed, I and my colleagues in the administration are looking very seriously at the 201 option, because frankly there is a clear recognition about the problems that the industry faces, how it has never really fully recovered from the 1998-1997 period, and an important part of that, as you know, is a commitment by the industry and the unions to a restructuring, so that at the end of that period, we have not just had protection, but we have had a more competitive industry.

Secretary Evans, Secretary O'Neill and I have been in discussions with the industry and the labor unions about that. I have certainly asked both to give us their suggestions on how that might work. We also, I think, need to look at this in the larger international context, because clearly the industry is dealing with capacity issues, dealing globally. But we are seized and focused on the issue, and as we have discussed, I frankly think the 201 approach, if we can work out these pieces, could be more productive than others.

Mr. LEVIN. Thank you.

Chairman THOMAS. Thank the gentlemen.

Does the gentleman from Michigan wish to inquire?

Mr. CAMP. Yes. Thank you, Mr. Chairman.

Mr. Ambassador, my question goes to agriculture, particularly the area of dried beans. The Mexican government for a number of years has been putting requirements into the permitting process for us to export our dried beans to Mexico, which our producers would like to do. Recently, as late as February 27th, the Mexican government published details of their auction to be held in March, and in that said that only a quarter of the permits would be made available, and this is yet another effort where they have made these requirements.

Auctioning only a quarter of the permits would put our growers at a distinct disadvantage. Is there any comment you can make on that particular problem?

Ambassador ZOELLICK. Yes, Mr. Camp. I was aware of the issue and raised it with my Mexican counterpart, Secretary Gavez, in one of our first phone conversations. I then met him, either this week or last--time is passing quickly--and raised the fact that the regulations you referred to are a disappointment, not only for that reason, but some of the timing requirements--I think they only allow 35 days to be able to load this on railroad to Michigan and other places would be unduly prohibitive, and the only access to the licenses are for people who have had licenses before.

So I told him how important I thought it was that we move on this. He needs to work with his agricultural ministry. He pledged to do so, and we have some other issues that are related to this that I hope will allow us to get a rapid resolution.

Mr. CAMP. Thank you. Also, with the impending expiration of the U.S.-Canada softwood lumber agreement, are you working with the Secretary of Commerce to come up with a plan to prevent any injury to the industry between the end of the agreement and the possible imposition of preliminary countervailing duties and antidumping duties?

Ambassador ZOELLICK. Well, I am glad you raised this because it is particularly important in an open forum that we all have a sense of how we are trying to approach this issue. I tried to speak with a wide range of people in the industry about how they thought it was best to approach this, and at first there was some thought about a continuation of the agreement, but I got a strong message from the industry that that was not their preference, that they prefer to have us basically get out of the way so they could file the antidumping and countervailing duty suits, and I told them I would be supportive of that process.

As I mentioned or alluded to in my conversation with Chairman Crane, I also pointed out that when I last dealt with this issue at the Treasury Department, we actually were able to get an export tax in Canada because there were findings of subsidies. If the subsidies are found and the dumping duties are found, I still believe that may be a productive solution, but one has to reach that step. The last point, Mr. Camp, on this is that I made clear to Minister Pettigrew who is certainly aware of this issue, that the concerns here are volatile to explosive, and I urged him to consider any other steps that they might take as the agreement ended so that we do not make the problem worse.

So I know the importance of the issue and it is my understanding that this is the preferred approach of the softwood lumber industry.

Mr. CAMP. Lastly, I have one other topic, being from Michigan, obviously U.S. automotive exports face considerable obstacles in other markets, in contrast to our fairly open U.S. market. Obviously our access to these markets is just a simple matter of fairness, as well as jobs here. Do you have any comment on that particular area, as well?

Ambassador ZOELLICK. Well, let me start with this. I think the U.S. auto industry, under competition, made tremendous advances in the 1980s, and I think that, along with those advances, the fact that the U.S. auto industry now is a competitive force around the world, which frankly, at an earlier point, I am not sure that they were focusing on those markets.

So I think it is particularly important that we try to follow through with them, to try to help them open those markets. The whole industry is changing globally, as you know. A large number of the Japanese auto companies are now either owned by or have significant investment portions of other countries, and that actually creates some possibilities, because the key in a lot of these markets is to try to deregulate and add some transparency. This is true in Korea as much or more as it is in Japan, to try to open opportunities for our auto industry, as well as the auto parts industry.

So I think those are important issues on the agenda. I am meeting the Korean president this week and it is one of the ones that I plan to mention.

Chairman THOMAS. Thank you very much.

Chairman THOMAS. Thank the gentleman. Does the gentleman from Oklahoma wish to inquire?

Mr. WATKINS. Thank you, Mr. Chairman, members of the Committee.

Mr. Ambassador, it is good seeing you. I want to say thanks for returning my call, even if it was on a Saturday. I appreciate you getting back to me on that.

Ambassador ZOELLICK. Pleased to do so.

Mr. WATKINS. I would just like to say, on the last statement of your statement there, it is very important and I want to talk about it--agriculture, my friend from Missouri, Kenny Hulshof and I, worked and pushed the last several years on trying to get an agricultural ambassador status, to try to give us hopefully more prestige at the table for agriculture, because I am a alarmed, very alarmed, when I see what is eroding in our trade overall, and I want to bring that up a little bit.

But you last comment is we would be appealing and people would come to us if we are accessible and resolute. Well, I want to be resolute for the United States of America. I want to point this out. I think literately, and my colleagues, I do not think we have had the right shake in agriculture because a lot of people in agriculture do not have an emotional commitment about agriculture.

I think our USTR, back in 1993 at the GATT talks, Uruguay Rounds, sold us down the drain, to be very truly. I want to point this out because our trade decisions affect this--even our budget process right here. Our trade decisions affect some markets around the world and our supply and demand factor depends on those markets. You made a statement earlier where the EU has signed 27 bilateral trade agreements when we have only signed two. Many of the bilateral trade agreements give them a better positioning in agriculture.

Now, why they are able to do that is because of that 1993 Uruguay GATT talks, where basically all the other things were agreed to by the USTR, by the United States, all of them except agriculture. When we got down to agriculture they finally said, after negotiating and discussing, they finally said, well, let's have a peace clause. Here is what happened, fellow committee members, with that peace clause; it grandfathered in over $7 billion worth of agriculture subsidies for the European Union, Earl, and only grandfathered in about $200 million for the United States, which we basically have not used.

What has happened has caused us to lose a lot of markets. We cannot sell. Because of supply and demand, we find that it drives the U.S. agriculture products down, and then we end up having to pay more in our loan programs out of our agriculture budgets here, and we get criticized a great deal here in the United States.

I know my colleague from Maryland said something about the steel industry earlier today, but less than four decades ago, we had 16 percent of our population in the production of agriculture. Today we only have 1.5 percent of our population in the production of agriculture. We have to go back and say we can produce--we can produce, but we are not willing to sell. The European Union says we will pay whatever the price, and I would like to know your plan. I am concerned about the fact, Mr. Ambassador, we have not had people sitting at the table in your position that had a genuine concern about agriculture.

I know some people say, well, the FSC and other things are going to be affected if we push this or that, but what that tells me is we are willing to sell our agriculture people down the drain. I would like to get your comment and I have got one follow-up I want to ask you.

Ambassador ZOELLICK. I will try to be brief, Mr. Watkins. This one starts with the President. The President, whenever he talks about trade, talks about agriculture. When he interviewed me for the job, it was the first topic he raised. So the commitment of the President on agriculture and trade is the start of the pyramid. I agree with you about the importance of the agricultural ambassador. I think it is a very important appointment. I am in the process of looking at a number of people. I think it is important that person have excellent ties with the agriculture community in the United States, but also be able to negotiate firmly abroad.

I may give you partial satisfaction on this. I am from Illinois, and I have family who still farm in Minnesota, so I have some sense of the farming business a little bit, and I also early, in my tenure, met with a large number of farm groups because of the importance I place on this issue, and I think that Secretary Veneman and I, who I have the greatest respect for in this, will be able to work altogether.

As you know, even with the present limitations, these markets abroad are critical to U.S. farmers, because about one out of three acres that the farmer plants in America is exported, and about 20 to 30 percent of farm incomes deal with exports. So even with the limitations, it is critical to their role. A lot of this comes down to the EU, as you have mentioned, and we know this is not going to be easy given the subsidies that they have built into the system. What is happening in the EU right now, however, is interesting and gives us some prospects--

Mr. WATKINS. Would you yield just a second?

Ambassador ZOELLICK. You bet, sir.

Mr. WATKINS. I would like my colleagues to know that out of EU's budget, they spend over 50 percent, nearly 60 percent of their budget, to subsidize agriculture.

Ambassador ZOELLICK. That is exactly the point I was going to come to, is that given the problems they are now having, with mad cow disease and the foot-mouth and other issues, plus the fact of European Union enlargement, they are going to even get more pressure on this issue. There will certainly be many in the European Union who will resist change, but there is supposed to be review in the year 2002 of the EU's policies, and frankly one of the reasons I would like to get trade promotion authority is I would like to go to the EU and say we are now backed by our Congress to go ahead and negotiate; where is your reform in the CAP program in 2002 so we can move ahead to global round, because I think the stars may be aligned to move this further in the EU.

Chairman THOMAS. The gentleman's time has expired.

Mr. WATKINS. Could I refer also to page five--

Chairman THOMAS. The gentleman's time has expired. We have very limited time, and other members wish to ask questions as well. I apologize to the gentleman. Any member wishing to submit a written question to the ambassador will get a very full answer.

Mr. WATKINS. Thank you, Mr. Chairman.

Chairman THOMAS. Does the gentleman from Texas wish to inquire?

Mr. DOGGETT. Thank you, Mr. Chairman.

Ambassador, is it your personal opinion that prompt congressional approval of the Jordan agreement as written would be in the national interest?

Ambassador ZOELLICK. As written, I am not sure, Mr. Doggett. I believe that there are some serious issues related to the final use of trade sanctions. I believe that, in the Jordan agreement as a whole, there are some important principles there that we need to try to work on, and I have talked about these with Mr. Levin. I think the idea of having countries enforce their own laws is an important step. I think the step that is related to the fact that when we consider enforcement, we do not just look at one incident, but we look at the question of whether there is a pattern, is another important issue. I think the relationship to trade is an important issue.

So there are a number of elements of that agreement that I think are very interesting for us to work on. I think, when it comes to the level of sanctions, this is something that could still be very difficult for us. So, in terms of the larger context, I would like to move forward that agreement. I would like to have further discussions about enforcement.

Just one other word on this, if I could. Having talked with both labor and environmentalists about this general topic, the sense that I have gotten is they are most interested in some sense of equal treatment of trade and labor and the environment, and maybe that is something we can work on, even within this framework. But I would like us to try to resolve those issues expeditiously so we can get this agreement done.

Mr. DOGGETT. I know you are familiar with the executive order that President Clinton signed in 1999 requiring environmental reviews of trade agreements and of the guidelines to implement those environmental reviews that your predecessor, Ambassador Barshefsky, approved last fall. How do you plan to implement environmental reviews of our trade agreements so that we can have objective information about the consequences, not only within this country, but around the world? Perhaps the softwood lumber agreement that has already been mentioned would be a good example of your explaining to us your level of commitment to see that those environmental reviews are complete and meaningful.

Ambassador ZOELLICK. Let me just take the last one first. Since I do not think we are on track to have an agreement, I do not think we are likely to have an environmental review. I know that a number of the environmental NGOs actually share some of our same concerns about timber practices in Canada. So it is a good example of how we can work together, even if not formally. On your larger question, I believe these environmental reviews can play a very important role, and one of the things I frankly want to try to get a better sense of is how we do them formally and informally, and timing.

Let me give you an example. In talking with some environmental groups over the past couple of weeks, some have suggested to me that as we start to frame our negotiating objectives, there may be things that we can do in the market access area; for example, export subsidies in the European Union certainly raise questions among environmentalists. There are some in the marine fisheries area where we can have a win-win solution as we go forward. Then there is a question about how the trade and economic flows need to be complemented by other environmental issues or protections or other aspects; and so I frankly am very open about how we try to approach this, and I know that back in the NAFTA and other processes, that this was an important precedent that was set, but also builds broader support; and that, to me, is part of the name of the game here.

Mr. DOGGETT. Thank you. Another environmental concern has been the use of investment agreements that are certainly important to protect our investment abroad and the investment of others to challenge, particularly under NAFTA, existing environmental provisions. I know you are familiar with the suit of a Canadian company claiming over $1 billion in damages because California expressed concern about MTBEs and the threat that they posed to the drinking water supply. How, given the likelihood that investment provisions would be part of a Singapore or Chile agreement, how can we ensure that we protect the rights of investors without seeing these agreements misused to undermine our environmental laws?

Ambassador ZOELLICK. Mr. Doggett, I am looking at that question right now. I am trying to get more detail about these cases to get a sense of whether they are real or whether they are cases that are just trying to use a process. As you mentioned, we obviously do not want to make changes on our side that end up hurting our American investors abroad, but there may be some aspects that, to ensure that our regulatory and safety and environmental provisions do not become a basis of trade action, that we have to consider some adjustments.

All I can tell you beyond that is that I have had this discussion with both my Canadian and Mexican counterparts, related to Chapter 11, which is the NAFTA one, and the prior Mexican administration was unwilling to consider any adjustment in this one. This one is willing to look at the issue to try to deal with it. So I would be pleased to work with you as we develop our thinking about how to get this fine balance.

Mr. DOGGETT. Thank you very much.

Thank you, Mr. Chairman.

Chairman THOMAS. Thank the gentleman. Does the gentleman from Ohio wish to inquire?

Mr. PORTMAN. Thank you, Mr. Chairman.

First, welcome, Mr. Ambassador. We appreciate your hands-on approach, your keen recognition of the needed partnership between the legislative and the executive branch, and from what I have heard this morning, your contacts around the world. I think they are very helpful. I also appreciate your taking a fresh look at the steel issue through the 201 lens. I know the administration is committed to doing that. I think that is more productive than where we have been on that issue.

With regard to trade promotion authority, it expired in 1994, as you well know, and during those seven years I believe there has been a lot of pent-up interest in free trade agreements and expanding markets for American products. I am going to be very interested in providing trade promotion authority for all the reasons you have talked about this morning. I do think that, as you said earlier, we need to broaden the support for trade, and I do not think we can do that unless the WTO, the World Trade Organization, works. The heart of the WTO, of course, is the dispute settlement procedure.

As I look at the cases that have come up, where the United States wins, we do not always get compliance. Where we lose, we always comply. I would bring to your attention one that you have noted in some other hearings and is in some of your testimony, which is the beef and banana case. There, we win constantly. Time and time again, the Europeans simply snub their noses at the United States, and therefore the WTO. I would just say that if we are going to have this broadening consensus and support for trade here on the Hill, we have got to have a system that works.

When those of us who promoted the WTO did so, we did so because we were convinced that we could have some resolution to our cases. Frankly, the ag community was very critical to getting WTO approved and moving it forward. These two cases are about a lot more than those two products. They are about the credibility of the WTO. In your testimony, you said that you were interested in working with the EU, and I think I am quoting you here accurately, "to improve and strengthen the WTO process." I wonder what you mean specifically by that and what actions you plan to take to ensure that we have a WTO that we can rely on and therefore promote more free trade up here on the Hill.

Ambassador ZOELLICK. Well, Mr. Portman, I am in full agreement with you, as you know, on this. I have always tried to emphasize to Europeans, even before I was in this job, the key point that you made, that these are more than these individual issues. They are a sense of confidence in the WTO system. This was best made at a meeting I was at in London by your colleague, Cal Dooley, from California, who said he did not have a particular interest in the products at issue, but for him to stand up in the well of the House and say he supported a dispute resolution system where we win and we win and we win on the appeal and there is not an effective resolution undermines support.

So I agree with that, four square. On the particulars of the ban at issue, since that one is front and center at present, I have had a chance to talk with the two primary companies involved. As you know, they have a slightly different approach to this issue. I have also tried to ensure that the approach the United States is taking has basic support throughout the Caribbean. I know that Mr. Rangel is very interested in that, as well as Latin American countries, and I think all but one basically support the approach we are taking.

We have a near-term issue here that I will be discussing with my European colleague, which is that I would like to at least have some time to be able to try to negotiate with him to see whether we can resolve that issue, working closely with the companies involved. The European Union is about ready in March to take a position in a lower-level committee, that would preclude the follow-through of negotiations that occurred in the past because it would be creating a new system. I said quite clearly that if they do that, I see no recourse other than to start to use the carousel provisions.

If we do that, the European position is that they will follow up with the foreign sales corporations. So it is again important that everybody be aware of what we are heading off into here. But I feel as strongly about this as you do, and I think that, at a minimum, we need some time to try and see if we can close gap, and so I have urged our European colleagues to give us that time period to try to do that.

Mr. PORTMAN. Thank you, Mr. Ambassador.

Thank you, Chairman.

Chairman THOMAS. Thank the gentleman.

Does the gentleman from Wisconsin wish to inquire?

Mr. RYAN. Thank you for being here today, Ambassador Zoellick, and I am excited about your testimony, especially with regard to agriculture. I represent southern Wisconsin, and we like to call ourselves America's dairyland. I know some Californians may disagree with that, but in our part of Wisconsin, we produce basically class three and class four milk, which is butter, cheese and dry, powdered milk. I wanted to bring an issue to your attention, the milk protein concentrate issue. It is something that has come about since the Uruguay Round. It is becoming a growing problem in the dairy industry with respect to its content in cheeses.

A lot of folks in the dairy industry are encouraging you to exercise Section 201, 301. There is a lot of angst out in dairy land. Just to kind of give it to you in a paraphrasing way, when you bring more milk protein concentrates abroad into the content of cheeses, you are displacing the dairy products we produce right here in America. So there is a lot of concern out there. I wanted to bring it to your attention, but more importantly, have you looked at this? What is your take on this? What do you think would be reasonable solution to this?

Ambassador ZOELLICK. Unfortunately, Mr. Ryan, I have not had a chance to look at this, but I would be pleased to do so and back to you on it.

Mr. RYAN. I would appreciate that. Thank you.

Chairman THOMAS. Does the gentleman from Massachusetts wish to inquire?

Mr. NEAL. Mr. Ambassador, there is a quote that you used in your written testimony which I thought was not only timely, but catchy. You stated that, as President Bush has stated, free trade is about freedom; quote, "Economic freedom creates habits of liberty, and habits of liberty create expectations of democracy." What is wrong with Cuba?

Ambassador ZOELLICK. Well, Cuba is not a democracy. That is for certain, as a starting point. Are you talking about in terms of trading relations?

Mr. NEAL. Yes; China, Vietnam.

Ambassador ZOELLICK. Well, I think that Cuba--I know people often try to compare Cuba to China, and I honestly see them as quite different for the following reasons. We have seen no evidence of Castro being willing to implement any change, and hope always springs eternal, but instead what we see is him shooting down unarmed planes. We see him getting defectors and trying to rope them back into his country. So, just again to be slightly more factual about this, I first visited China in 1980, and I last visited China a year or two ago. There have been enormous changes in China. Depending on how you count, about 30 to 50 percent of the economy is in the private sector in China.

Right now, the problem in Cuba is that any economic opening just ends up supporting his dictatorship. If one can try to figure out a way to change that, as it has been changed in others, well, then it could provide the basis of opening. But right now, that is not the Castro we have seen; and I have to say, based on a 31-year record, I do not see him changing his spots.

Mr. NEAL. There are many of us who believe that Castro's demise would be hastened by opening up trade between the two countries and ending many of the problems that have existed over the past four decades. But my sense is that this is an example where we sometimes miss the point. I mean, we are really talking about Florida and the electoral count, and we have to get past that in this debate as it relates to Castro.

My sense is that Mr. Crane has been more than fair here as chairman of the Subcommittee on Trade, and there are many Republican members here, incidentally, who have been very open-minded about this. They have been terrific. I sense that in the House--that we could come very close to passing a resolution reversing this policy. There is growing support here for opening up trade with Cuba, and we cannot continue to say that the world's largest nation, which has taken this great leap of faith that we did by ending annual MFN votes and proceeding with a permanent trade agreement with China, and then in the next breath say we cannot trade with this small nation, 90 miles off the American shore which is not terribly important to America's daily interest any longer. There is a real chance, I think for you folks at the White House in this instance, to reverse this policy towards Cuba.

As for our side, let me tell you, Mr. Ambassador, that we were as guilty of many of these things as I suspect you are, even in the argument that you gave me. There is room here for honest disagreement. But at the same time, I hope that you will use the private moments with the President to urge him to take a new look at this. There are Republican members here, as I said earlier, who are willing to take a new look at it. On the Democratic side, I think we are willing to take a good look at it. And I hope that you might offer a new perspective when you are back to see us in the near future.

Ambassador ZOELLICK. Well, I take your point. I understand what you are saying.

Mr. NEAL. Thank you, Mr. Ambassador.

Mrs. JOHNSON OF CONNECTICUT. [Presiding.] Welcome, Mr. Ambassador, and since the next person to question is Mr. Shaw, and after him was myself, I am going to just go ahead with my question while he returns from voting. First of all, let me say how very important it is that I think you deal directly with the issue of trade promotion authority.

There is no question but that we were compromised in the last few years in the international arena by not having proper negotiating authority resting solidly in our U.S. Trade Representative, and I look forward to working with you on that. But also want to mention that Egypt is one of America's most important allies in the Middle East, and a U.S.-Egyptian free trade agreement, when combined with free trade agreements with Israel and Jordan and the Palestinians, would form the basis of a Middle East free trade region with our essential peace partners.

I would like to work with you as my colleague, Howard Berman, and I worked with the preceding USTR on promoting this kind of agreement, because I think it not only would be important to ensuring the integration, the economic integration of our friends in the region, but also our competitiveness in the face of an increasing number of association agreements between the EU and, not only countries in that region, but also in North Africa.

I think those association agreements are very compromising of the competitiveness of American businessman and American products in those countries, and bode ill for the future. Any comment on that proposition?

Ambassador ZOELLICK. Well, I certainly share your objective and I certainly share the importance that you place on Egypt, which I think is about 90 percent of the population of the Arab world. I believe President Mubarak may be coming to visit before long, so it is a subject I suspect that he will also raise. I have discussed with my staff what are the practical steps we could start to take on this.

As you may know, we have a trade and investment facilitation agreement, and I think we have to build in an important discipline in this process. I know you would agree. People sometimes like the idea of free trade until they actually have to do the work to make it happen. Right now, the Egyptians have not been as cooperative as I wish they would be in the WTO negotiations. So maybe there is one way that we can have some common ground there, as well.

In terms of their intellectual property and their tariff issues, we have got a ways to go there. But my on view on this would be to try to set a path and some building blocks to see whether we can make some progress and work towards the long-range goal, because we do not do either them or ourselves any good by just saying, "Oh, well, we are going to have this agreement," but without recognizing that there has to be some serious, serious reforms in Egypt to accomplish this.

As you know, our aid program is about $2 billion a year to Egypt, so it certainly makes sense that we try to facilitate trade. But, unfortunately, I have sometimes seen in the past that that aid has precluded the reforms that they need to make.

Mrs. JOHNSON OF CONNECTICUT. I certainly appreciate the importance of the comments you just made. It is also true that it is very difficult for countries to make some of the progress they need to make in some of these areas, both reforming their own laws, intellectual property issues and so on and so forth, without, in a sense, some clear opportunity for the country at the end of that road. So I think that is the tension that we are confronted with in Egypt. We have used American aid dollars exceptionally well to promote some analysis of Egyptian law and American law and so on and so forth, and make progress in the discussions in these areas; but I think it is important to begin looking at what is the broader goal, and how do we enable other countries, as well as ourselves sometimes, to make the tough steps that are necessary.

Now I would like to both yield the chair and the right to question to my colleague, Mr. Shaw, from Florida.

Mr. SHAW. [Presiding.] Thank you and I join my colleagues and welcome you before the hearing. My district is in South Florida. I have been told that much of the questioning has become somewhat parochial, but that is the way we do business around here on many things. But I wanted to ask you about two issues that I think are important to the entire country.

One is, as you probably are aware, there probably will be a permanent home for the Secretariat of Americas, and South Florida is in there as a strong contender. I think that from a language standpoint and an ethnic standpoint, as well as certainly an economic standpoint, that we should prevail in that. I would hope that we would have your support in making Miami Dade County the permanent seat of the secretariat.

But I also want to talk to you just a moment about Haiti and what is going on there. We have, I think, probably a tremendously failed policy in Haiti. The country is suffering terribly because of the failed policy that we have had, partly because of it and partly because it has not gone in the right direction. I think one thing that we have learned in Haiti is that you cannot have a democracy without an economy. People have to have something to hold onto, and it is hard to tell somebody how important democracy is when the children are suffering and going to bed hungry. People are living in cardboard shacks down there with open ditches for sanitation waste. It is just a nightmare.

I do not know whether the administration has had time to really try to formulate some type of a Marshall plan or some way to return an economy to that island nation, but I think it really speaks very poorly of our country, that we have one of the poorest countries in the world right there at our doorstep. What do you see as what you might be able to do as the trade representative of the United States in order to bring that economy up to something that would certainly be much better than what it is today?

Ambassador ZOELLICK. If I could, Mr. Shaw, let me just address your first point for a moment, and that is I think it would be an excellent idea to have Miami be the location of that for the Free Trade Area of the Americas. I have to say I think the commitment by people in Florida, in general, and Miami to try to support the overall concept is a testament to why it would be a good location. Just as a small area of trying to both support that, it also demonstrated, we agreed to have the next round of our talks with Chile later this month in Miami.

In the process, I must say that one of the reasons that helped us do it is that some of the civic institutions in Miami were particularly cooperative in helping us be able to put that forward. So they have a record of demonstrating some support for the trade issue in a practical sense, as well as in a sense of a policy commitment. So I think that would be a wonderful result.

On Haiti, like you--it is a tragic and sad story in that we occupied this country for about 17, 18 years earlier in the century. We occupied it again. We put billions of dollars, as I understand, into it, and yet it is sinking back. I think, as Mr. Rangel had probably pointed out more generally in the Caribbean, the best way that we can help in the trade area is to try to provide the openings so that if some businesses start to develop and small businesses develop, they are going to do so in sectors that are sometimes somewhat sensitive here.

One of the things that this committee managed to reach some agreement, and in doing so talked to some of the industries that were most concerned about that, as to how we could create special trade preferences. I think that is the best way we can approach--as you know, you cannot do this for another country. They have to be willing to build the small-business sector, the rule of law, deal with the violence issues. But if they do, then we really do have to be ready to buy their goods so that those people have jobs and so they have some sense of improving their livelihood.

Mr. SHAW. Also, of course, following on to what you are saying, is it will also promote a great deal of investment, which is tremendously important.

Mr. Hulshof?

Mr. HULSHOF. I appreciate that, Mr. Chairman.

Welcome, Mr. Ambassador.

Mr. Chairman, mindful to your suggestion to us that we may be speaking to a broader audience, I want to seize on something that you said in your written testimony, and that is helping make the case to the American people. I appreciate that fact that you have acknowledged that, in addition to your primary role of sitting at the table and negotiating with other nations, that the case has to continue to be made to our own domestic citizens.

Out on the hustings, Mr. Ambassador, NAFTA, to some, is a four letter word. The battle in Seattle was a cause celebre for those opponents of globalization. Even now, protectionists look at this unprecedented trade deficit and they say there is a disaster waiting to happen. To the displaced worker, for instance, whose sees simply the disparity in labor cost in this country than, say, with other nations, and they see a plant closing in our country, relocating to that other nation, often to that displaced worker it is simply a matter of cheaper labor when, in fact, as we know from this committee, it could be the international tax laws that we have that put our businesses at a competitive disadvantage.

It could be, for instance, as we have been interrupted by these votes, with these upcoming rule on ergonomics that is going to impose an additional cost of American business, that Congress, I think, bears some responsibility that we often create an unfriendly business climate, and that is part of the discussion, although that is probably a little bit more than you wish to take on as far as helping make the case. But I do want to talk about a specific, and Mr. Watkins very passionately talked about agriculture, as Mr. Ryan did.

I want to focus just a little bit on biotechnology. The European reluctance to accept the importation of GMOs, and again, that is the terminology, genetically modified organisms, although I prefer to call it genetically enhanced foodstuffs. GMOs have been a source of tension, as you know, in United States-European Union relations. It has been our position that GMOs are safe for human consumption; that we are in compliance with not only sanitary, but phytosanitary measures. The EU contends that GMOs have not been proven safe for human consumption. What I would say to them anecdotally is that after visiting my parents this past summer on our Missouri family farm, that part of our fare was BT corn on the cob, and I am none the worse for wear, but I know that is probably not something we can go to the European Union with.

I do want to seriously get to this point. The University of Missouri, which is in my hometown of Columbia, is becoming really a national leader in biotech research, and whether you are talking with those who make their living in agriculture--you mentioned your own experience of having family connections to agriculture--or whether you are talking to the dedicated researchers like the University of Missouri, I think the sentiment is shared that biotech does offer some really innovative ways for farmers to be more productive and to continue to meet the world's ever-expanding need for food.

So my concern is with the EU's hostility to biotech. They are our third-largest export market for agriculture goods, but the restrictions on GMOs are really hurting our ability to sell commodities abroad. My question generally to you then is, if you want to comment on anything that I have mentioned to date, but what assurances can you give to those researchers, to those producers in our own country, that this administration will continue to pursue this issue to ensure that our farmers and ranchers are not put at a competitive disadvantage? Let me just say I do recognize the political sensitivity of this issue in the European Union. How are you planning to work with the EU member Statess on this issue?

Ambassador ZOELLICK. Let me just answer your first comment briefly and then go to the core of it, because I think your first comment does bear a moment, and that is it is going to be vital that all of this, and this is going to be something I am going to try to do with the limited resources of USTR, try to communicate more broadly. As you can tell even today, I am trying to say this is not simply a matter of economics and business, as important as that is. It also relates to freedom and security. I think, in the whole globalization debate, we are going to have to be sensitive to the values and anxieties that are developed. There are different ways we can do that.

One that I have mentioned in some contest is, given the high sensitivity to HIV-AIDS, I was trying to be very quick in making sure people recognize we are not changing the policy and wanted to work with people to try to address that problem, because it is going to be core to building support. But on your core issue here, I am in 100 percent agreement with you. This gives me extraordinary frustration, and like you, I call them GEMs as opposed to GMOs, because this is, to me, a classic situation of where science is developing something with enormous potential and people are acting as if they are in the dark ages or the Luddite era in terms of refusing to understand the safety that is associated with science and bioengineering.

They are willing to consider how a map of DNA can help their health, but they are unwilling to use the same processes in what they eat. It is even, in my view, to try to address it, we need to try to draw the support of others, the developing countries, for example. Many of the developing countries, including China, are much more supportive of this because they see the importance of how this might help with vitamin A and rice and deal with blindness and disease, might help with health, might help with dealing with hunger in parts of the world. So in part, as in many areas, we are going to have to build a coalition to get better support.

Second, we are going to have to deal with the fears, in terms of food safety. In the case of Europe, much of this is not based on us. It is based on the fact they do not trust their own health systems because of the problems of blood and the various meat issues and others. If you are going to deal with the real problem, you have to deal with that real issue. This, in part, I think will require the Europeans to clean up their own act in terms of safety.

I think it is vital that in our work on this, that we keep emphasizing the importance of having decisions based on sound science. When I talked with some agricultural groups, they emphasized to me the importance of the Codex process and how we needed to work with the agricultural department, and Ann Veneman and I are already doing that. I have tried to emphasize that process. We are also going to have to do a better job of educating people to understand this.

The last point I would mention is that the fight is often in the trenches. Tolerances. At the end of the day, the way this is going, it might end up being that there will be different lines drawn, and then it will be a critical question of what degree of tolerance do you allow? When I was actually in Kansas, in the course of the last year, people were pointing out to me the danger of pollen that might spread from one crop to another, or the trucks that these products are hauled in.

So I am in 100 percent agreement with you on the issue. The last point I will say is, as my overall theme, this is going to be one of the key issues we are going to have to try to get done in another WTO round. I cannot do that unless you give me trade promotion authority.

Chairman THOMAS. [Presiding.] Thank the gentleman. It is an important area and it clearly needs additional discussion and approaches, but the gentleman's time has expired.

The gentleman from North Dakota?

Mr. POMEROY. I thank the chairman.

Mr. Ambassador I congratulate you to your new position and I think your background is really exciting in terms of the broad experience you bring to bear on our collective behalf. As the administration looks for fast-track authority, I think it will be very important for us, particularly those in the other party, to have a sense of how this administration views trade deals. I tend to be, representing an agricultural production area, strongly in favor of market expansion.

On the other hand, we have seen good trade deals and we have seen bad trade deals, trade deals that have insufficiently protected our interest. That is why there is a bipartisan group of us in the House and Senate that have formed a Farmers and Ranchers for Trade Caucus, to make certain that even while we promote trade deals, we do not end up with the kind of differential that works to our disadvantage, as was pointed out so well by my colleague from Oklahoma.

I think in terms of getting initial credibility, entree, Mr. Ambassador, the Jordan deal is very, very important. Some describe the turmoil in the Middle East now as really more about forces of modernization versus antimodernization. I think the Jordanian leadership, in advancing this trade deal, clearly comes down on behalf of the forces of modernization. Prompt recognition of that through prompt action on this trade deal, I think, gives us a wonderful foreign policy opportunity and trade opportunity at the same time. It is also an excellent opportunity for the administration to, I think, gain some credibility from those of us that will be watching carefully.

That was my observation. Now, to my question. Durham wheat, and specifically the conduct of the Canadian Wheat Board. State trading enterprises is one of those areas where I do not think we have sufficiently protected our interest versus the operation of a monopoly marketing system that controls completely through the vertical flow of product in other areas, and we have certainly seen that, grain farmers trying to compete against the Canadian Wheat Board have absolutely seen that.

We are convinced that there has been inappropriate, trade-violative activity of the Canadian Wheat Board, and that was why we supported strongly the petition advanced by growers in our region for a Section 301 investigation. Your predecessor approved the petition, and I understand now that your office has embarked upon the requisite investigation of whether or not there have been illegal or inappropriate activities of the Canadian Wheat Board. Can you advise us of the status of the investigation?

Ambassador ZOELLICK. Certainly. Let me just comment briefly on your first point. I definitely agree with you, and just to give you an example that probably hits home, I have pointed out to the Chinese that the bilateral agreement they made with us on agriculture, I believe in 1999, has been blocked in the area of wheat because of them stopping things at the border related to alleged phytosanitary standards, and that I noticed they just did an agreement with Canada at the same time.

So when we talk about WTO accession, I have said if you are going to be able to be in a position to say you are going to keep one agreement, you have got to keep all your agreements, and I think this phytosanitary issue is going to be one that we are going to have to fight a lot harder on. Secretary Veneman and I just, I think, made some headway with Brazil on what, on this issue, as well. So I am full score with you on that.

On Jordan, I would be pleased to work with you. I would like to get this done. I have some issues we are going to need to discuss, I think, and I hope to do that as quickly as possible. On the 301, as a mentioned in the Senate, I support this investigation. I have had enough sense about how the Canadian Wheat Board works that I can see the problems that it causes for our people in terms of their ability to price accordingly. Obviously this is not going to be an easy issue related to changing Canadian practices, but I very sympathetic to what you are saying and that is why I want to try to use the 301 in part to get additional information, and to be able to develop a stronger overall case.

This is another one of the issues that is on our list of four or five that we are emphasizing in the global round, which is dealing with these State trading enterprises, and this is the one that frankly hits us the most. So I share your interest in it and am trying to use that process to learn more about what we can do with it.

Mr. POMEROY. That is excellent. I am very pleased to hear that response. I would just finally note that even while we feel like we are at the receiving end of a deluge of subsidized or dumped Canadian grain, they have brought an antidumping action against our corn basically under the guise that it is sold below the cost of production. Well, that is just the sad reality of commodity pricing right now. We are not recouping the cost of production in market prices, but that does not mean it is dumping. They may be taking steps to make their initial action permanent. Are you addressing that with the Canadians, and that is my final question?

Ambassador ZOELLICK. I would just mention briefly I raised the issue with my Canadian counterpart, and as you know, it goes through their process, like we have our process in terms of the International Trade Commission. I pointed out the same points that you did. It will run through their process.

Chairman THOMAS. Does the gentleman from Georgia wish to inquire?

Mr. COLLINS. Mr. Chairman, only to say welcome, Mr. Ambassador. I appreciate the earlier comments you made. I was not here to hear them, but I heard about them, particular in the area of the Canadian softwood lumber. We have had several discussions as to that subject. Hope you are able to work something out with that. I understand time is drawing down on us, but we look forward to working with you over the next few years.

Ambassador ZOELLICK. Thank you, Mr. Collins.

Mr. COLLINS. Thank you, Mr. Chairman.

Chairman THOMAS. Does the gentleman from Pennsylvania wish to inquire?

Mr. ENGLISH. Yes, Mr. Chairman.

Welcome, Mr. Ambassador. I want to start by saluting you for your commitment to pursuing a new round of negotiations within the WTO. I think this is of paramount importance, but as someone who attended Seattle and was aware of some of the issues that led to a breakdown of the process in Seattle, one of the most troubling for me was the insistence by the Japanese and some of our other trading partners that our antidumping laws be reopened.

I am concerned about that because I feel that our antidumping laws play a critical role in allowing us to police our own markets against unfair trading practices. I think they are helpful to a wide range of domestic producers and are intended, perhaps not always in practice, but certainly in intent, they are to provide a level playing field and some fairness. My question is does the administration continue to support the position that our antidumping laws should not be on the chopping block in a new round of negotiations with the WTO; and second, is the administration open to the possibility of trade law reform consistent with the WTO guidelines, both in the areas of Section 201 and 301, to strengthen those laws and make them more accessible to American companies?

Ambassador ZOELLICK. Well, first, on the general principle, I agree with you that the antidumping laws play an important role in dealing with unfair practices. As you know, there is always a debate about how they are applied and the methodologies. This gets very complicated, but I think they are vital to the overall trading system and they are certainly vital to maintaining public support for open and free trade.

One of the issues we are going to have to look at here is that other countries are now starting to develop their legal regimes, and for all the criticism of ours, theirs are nowhere near as transparent or based on a set of rules and a regime that exporters can get some appreciation that they are going to get fair treatment. This is true in Brazil and South Africa, and these are going to be growing and important markets for the United States. So frankly, Congressman, as we look at that issues going into any round of negotiation, that is another feature that we have to examine.

In terms of your question about whether I would be willing to discuss or consider changes in our laws, as long as they conform with the WTO, certainly. I do not know the specifics, but as I mentioned in my answer to Congressman Levin on steel, I believe, I think 201 plays a vital role in the process. In fact, I think 201 could be much more useful than some of the other unfair trading practices if we put it in place quickly and we get serious restructuring, similarly the 301 process. So I am certainly willing to consider any set of ideas. I do believe we need to try to do them in a way that fits within the WTO system, because fundamentally we are the most competitive major country in the world. We want to make sure the system is a set of rules that works for us in a way that is fair, but also allows us to export abroad.

Mr. ENGLISH. Thank you, Mr. Ambassador. Let me urge you in addition, in thinking about conventional trade promotion authority, which I understand the administration is committed to seeking, as someone who was skeptical of several of the fast-track proposals that came before this committee in the past, I hope that the administration will keep an open mind when it comes to how to deal with issues like labor and the environment. It seems to me there may be a middle ground available here that would address the scruples of a wide variety of people concerned with this issue. I hope the administration will keep an open mind about the possibility in structuring this authority to provide for preauthorization of specific negotiations, as one feature of that authority.

That would give Congress greater control over the process, but also give you the authority that you need if we can work it out procedurally. Your are welcome to comment on that if you like.

Ambassador ZOELLICK. Well, on the first one, I definitely agree with you. As my statement said, I have an open mind about this both because I think it is the right thing to do and I think it is the thing to try to build a basis of support. It goes to my larger point about trying to have a sense of how trade relates to our values and what we are trying to accomplish more broadly in the world. On the second one, I am afraid I am not familiar with the details of the preauthorization, but I would be pleased, if you give me more information, to give you a fuller response.

Mr. ENGLISH. I will follow up. Thank you, Mr. Ambassador.

Thank you, Mr. Chairman.

Chairman THOMAS. Thank the gentlemen.

Does the gentlewoman from Washington wish to inquire?

Ms. DUNN. Thank you very much, Mr. Chairman.

Welcome to our committee, Ambassador. It is good to see you and I want to particularly thank you for making yourself available to sectors of our economy that are very interested in presenting our views to you, particularly the high-tech sector, very, very helpful to them and we appreciate that. I have three probably brief questions to ask you, and I apologize if these questions have been asked while I was over taking the vote. We have concluded an agreement with Vietnam, the first free trade agreement since the war in Vietnam, and I would like to have some sense of update on when this treaty will be delivered to the Congress.

Ambassador ZOELLICK. Do you want me to do each one or do you want to do all three?

Ms. DUNN. I can do all three if you like.

Ambassador ZOELLICK. Whichever.

Ms. DUNN. The second question I have has to do with the TRIPS agreement. At the world economic summit, I heard more talk than before about how developing nations are very concerned about meeting the TRIPS agreement, and yet the lack of compliance with this agreement is costing us billions of dollars every single year in the loss and the piracy of software. I would like you to comment on that and let us know where that stands and how you believe that is affecting industry in the United States.

Lastly, I am interested in knowing about the FISK situation. We have had a lot of discussion about that in the last year, rewrote the FISK provision, and the EU has indicated thumbs down on this. What happens next on FISK? I know that Pascolomi is going to be in town shortly and you two will be getting together. What is our position on FISK and what do you see ahead on that issue?

Ambassador ZOELLICK. Well, first, Congresswoman, I would like to thank you with your help with the high-tech community. I know that this is a particular interest of yours and you obviously have an extraordinary set of ties, and you brought these people into the public policy process. So the thanks really goes to you and I would be delighted to work with you in the future on these issues, because I think it is important economically and it certainly is important, as many people have mentioned, in terms of broadening base of support on trade.

On the Vietnam issue, as a mentioned to Mr. Levin, this is another issue that I have gotten a strong sense that there is an eagerness to try to move forward promptly. As you probably know, it is actually an agreement that just brings Vietnam to a normal trade relationship, like China was, but it does in the course of it have some very important market access and other arrangements. There is an issue that has been brought to my attention related to textiles, and that the possibility of the textile imports that would come in and whether there is a need for a separate agreement, and if so whether it would follow some of the provisions that Mr. Levin was interested in related to the Cambodia context; and so that is an issue that I think we are going to have to deal with here.

I understand that regardless the administration has the authority, if need be, to set quotas for textiles; and so it is my understanding that the Vietnamese desire is to get the agreement going forward and deal with that later, but that is a topic I need to get more wisdom from you and others on. In terms of the TRIPS provisions, I share your view that this is a critical area, not only because of the competitive advantage of the United States, but actually it is in the long-term interest of other countries, because if they are going to draw the investment that they are going to need to grow, often it is related to the intellectual property that is often associated with that investment.

So I believe that--I know there is a concern about the implementation of those provisions. My first preference, Congresswoman, would be to try to add their capacity, to be able to implement them, than to adjust them. But I am willing to listen to others as they try to figure out how we achieve this, because the goal is to make sure we get that protection. On the Foreign Sales Corporation, this committee and your counterparts on the Senate side, I think, did an extraordinary job in trying to make a fix of what the WTO found to be a violation.

As you probably know, the WTO will issue another ruling on that. The EU continues to challenge that. We will certainly do all that we can to defend that provision, and I have had some conversations with Stu Eizenstat, who I know is very involved with that. Under the WTO procedures, the EU is a position to be able to retaliate if they so choose, and they have picked a number related to the revenue estimate of about, I think, $4 billion, which is a rather large sum. That does not mean that is the number that would be accepted by the WTO, but that is what they are using.

Up to now, they have taken a position that they will not retaliate until the WTO makes a ruling. This brings us back to the carousel issue and bananas and beef. I have met with a coalition of the companies involved with the foreign sales corporation, just so I could get a better understanding of their interest and where they would like to go on this. I have also alerted them to the reality that if we follow through on the points, as Mr. Portman was raising in bananas, we have to be prepared for the counteraction. We cannot have it both ways. I am certainly willing to do that, because I think it is important that we defend our rights, but people all need to be on notice that that is the path that we are on.

I hasten to emphasize, my prepared path is to try to get some time to negotiate with Commissioner Lamy, for whom I have the greatest respect, to see whether we can at least give ourselves a few months to try to see whether we can resolve this issue. It has been kicking around for nine years. I do not see why the Europeans cannot give me a few months to give it a try.

Chairman THOMAS. Thank the gentlewoman. It is pretty obvious that every sword in trade is a double-edged one, and what is useful for us can be useful for others, and we have to be very careful about how we not only empower you, but how it is exercised, and I appreciate the ambassador's comments.

Does the gentleman from Colorado wish to inquire?

Mr. MCINNIS. Thank you, Mr. Chairman.

Mr. Ambassador, thank you for coming today. Before I begin my comments, I did hear your response in regard to Mr. Neal's inquiry on Cuba and China. I want to caution or at least add to those comments that I am not sure China is the one to compare in talking about the good guy and the bad guy. I certainly agree that Cuba is a bad guy, but I would want to just note that China has a number--while you mentioned that Cuba shoots down airplanes--China has extensive, extensive human rights violations. China has made its intentions toward the United States very clear. I think China is very clear on where its missiles will be aimed, and furthermore, yesterday China just announced they are going to increase their military budget 17 percent. So I would approach China with great caution, as what they show on the face is not necessarily what they have in the mind. They are kind of like a gigantic iceberg, in my opinion.

That said, I am concerned really primarily about two things, one on the WTO, that as you began your tenure here, that we be very careful in these trade agreements that we preserve our voice or our vote to be somewhat in proportion to our budget. In WTO, for example, WTO and our budget obligations, I think it is about 40 percent. You could correct me, but it is a significant amount of the total budget as compared to the one vote out of the total number of votes--and I think that we have to have some tough negotiations in regards to our budget contributions so that they are relative or somewhat relative, and we are not taken advantage of, which I think, frankly, under the previous administration, that we were taken advantage of on the budget issues, because that was not their focus, and our focus here sometimes is so intent on the trade agreement and on the future of the trade agreement, we ignore the budget obligations that we sign onto.

As the Ambassador knows, it took a great deal of negotiations and certainly a withholding of our dues to the United Nations to get our budgetary obligations dropped, I think, 1.5 percent; I think from 26 percent to 24.5 percent. I am not sure, but it is in that ballpark, right in there, those numbers. So I would ask that you watch those budgetary obligations with some care.

Finally and I would like your concern about this, of course, coming from Colorado, we have a lot of ranch country and so on. I am deeply concerned about the hoof-and-mouth disease that has broken out. In the United Kingdom, as you know, it has created a collapse, and as I understand it, once they determine that this disease is in existence on a farm, not only do they take out the animals--and understand that in the European Union countries, they are paying for those animals--but in order to cleanse of the disease, the farm then has to sit idle for six months thereafter.

I am wondering what your thoughts are and what kind of provisions we have in these kind of trade agreements to, for example, immediately stop importation of a product that may threaten the well-being of our products or health over here. Could you comment? I just do not know about that and I was curious about that, if you could help me?

Ambassador ZOELLICK. It is an excellent question. First, on China, I take your point. I used to deal with China in a different context and I know what they can be like. I do believe that, and obviously this committee believes, that there is an openness in China that we need to work with, in terms of developing the rule of law, and I do believe there are opportunities there, but it does not take anything away from any of the security points that you mentioned, including espionage. On the WTO budget I will look into the percentage. I do not know for sure. It is a good point. I would just like to put it in a little context.

I do recall seeing the size of the WTO budget not long ago, and it is minuscule. I do not remember the exact size. It is like $25 million or $35 million, and remember, the dues that we were paying for all of the U.N.--it was like a $900 million appropriation. So while we look at the percentage, we also have to look at the amount, given what we get from it, but it is a fair point about the U.S. share. On the hoof-and-mouth question, this goes to the issue of SPS, the sanitary and phytosanitary standards. It is not directly, at least to my understanding, within the USTR area, because the monitoring of this would be done by agriculture and other services.

I believe, but I will check for you, that there are a series of provisions that would allow us to take emergency action. For example, even recently under the NAFTA accord, when the Canadians were concerned about lack of data from Brazil dealing with mad cow--there was not even any evidence of the BSEs. It was just data--that they stopped Brazilian beef, as you may know, and under our NAFTA accord, we went along with that. Fortunately we worked that out and no one had any sense of a problem with that, but clearly there is an ability to respond in emergency fashion.

The tricky thing about the SPS standards is how others can use them against us. So it needs to be based on a reasonable scientific basis. We have a problem with Australia right now--Chairman Crane was asking about it--related to grapes. So I think again what I answered, I think to--maybe it was Mr. Hulshof's question--about the key role--that we need to rely on the Codex and others to be able to act immediately, if necessary, but make sure this is done on a sound scientific basis. Otherwise, our agriculture is going to be the big loser.

Chairman THOMAS. Thank the gentleman.

Does the gentleman from New York, Mr. Houghton, wish to inquire?

Mr. HOUGHTON. Yes. Thank you, Mr. Chairman.

Ambassador, great to have you here. Thanks so much for taking your time. I have not been here recently, and therefore I may be redundant. If so, just skip over some of these questions. One statement and really one question; the Washington Post this morning had an article called Sabotage in the Senate. I do not know whether you read this thing, and it talks really about the steel industry. It said: "Mr. Zoellick is due to appear before the House Ways and Means Committee today. It will be interesting to see whether there are saboteurs in that chamber, also."

Classify me as a saboteur, because I really think that the golden rule should apply; that if people are going to sabotage our markets, which is the most precious thing we have, we have got to somehow have some sort of a mechanism to protect ourselves, whether it is 301 or 201 or whatever it is. It is very easy to create a statement like this, but when your job is on the line, whether you are in Pittsburgh or wherever it is, it is a very, very serious issue. I, as a Republican, as a free trader, really strongly believe in this.

Let me just ask you a question. When a businesses is in trouble and it is going through economic difficulties, it tries to increase its sales, because you cannot shrink yourself rich. You have got to be able to increase your volume. What are those things, those mechanisms under your control or under our control, we can try to go out and sell the other 95 percent of the world and some of our products to be able to keep our employment up?

Ambassador ZOELLICK. Well, first, I can once again thank the Washington Post for helping me with an issue at a sensitive point in time. But I want to say a word on steel, because if you were not here, I wanted to emphasize that the way that Secretary O'Neill and Secretary Evans and I are all trying to look at this is in the context of a possible 201 investigation. The op-ed actually referred, or the opinion piece referred, to antidumping and countervailing duty. Those have been used with varying degrees of success, and what we honestly believe might be the best course here is if we can get some significant restructuring of the industry, as you know from your own experience.

Mr. CARDIN. Could I ask my colleague to yield on that point?

Mr. HOUGHTON. Yes. Absolutely. If it is all right. Do you mind, Mr. Ambassador? All right. Go ahead.

Mr. CARDIN. I appreciate that. We have had a chance to talk and I very much support your position on trying to look at the 201s and enforcing our laws. You have mentioned over and over again the restructuring of the industry, and I just at least want to put on the record that the industry has gone through a significant restructuring already today. They have invested an awful lot of money. There has been a lot of downsizing as far as the number of steelworkers. There has been a lot of consolidation and a lot of reduced capacity in this country already.

I just really want to put on the record that there has already been a significant restructuring within the steel industry, and they are finding that as a result of what happened in 1998, we have not recovered from the low prices of steel. That is having a major impact. I know that you are aware of this, and I just really want to put that on the record, and I thank my colleague for yielding.

Ambassador ZOELLICK. I appreciate it. It is a good point. I am sorry I did not include it myself. So what we are actually trying to do is to work with the industry and the unions and see whether we might be able to follow that course, and we have got a group together that is trying to gather some of the data and some of the industry analysis to do that, and as I also mentioned, it occurs in global context. So that is how we are trying to deal with that one.

On your larger point about increased volumes, the first thought that comes to my mind, Mr. Houghton, but I will be pleased to give it additional thought, is that this goes to the basic issue about trying to reduce barriers around the world for our products. I believe, in many industries around the globe, the United States can certainly at least hold its own, but whether we deal with traditional barriers like tariffs, barriers related to investment so you can have some of your operations there with the trade flowing with investment, whether it is related to various standards and regulations, this is what interrupts the trade flows.

As my prepared testimony stated, it has been quite extraordinary what has happened with additional trade flows in terms of growth and income. That same op-ed, to give the Washington Post its due, noted that the increase in terms of income in the United States due to the increase of these two or three or four percent trade flows, is quite enormous. So I think that is, to me, the best way to try to approach the question of helping companies work through difficult times.

Mr. HOUGHTON. Just one other thought. There are long-term important measures to be taken, and you have just cited one, reducing the tariff barriers and making it easier for our products and services to go elsewhere; but there are also short-term emergency measures. Maybe you could think through that a little bit, and I would be willing to talk to you, because there are a variety of different examples here that could be used, because in surges or in pullbacks, certain things are necessary in the short-term period that are not in the long.

Thank you.

Chairman THOMAS. Thank the gentleman.

Mr. Ambassador, we promised we would get you out by one o'clock, and obviously our goal was to try to keep on a general focus in terms of the broad-based tools that we might need, but in any discussion of trade it gets down to specific interests fairly quickly. But I do want to conclude on a specific point, and that is this. The chairman and the ranking member, the chairman of the Trade Subcommittee and the ranking member of the subcommittee, and especially those who worked hard in addition to those individuals, Mr. McDermott, Mr. Jefferson, and others, are somewhat concerned about the way in which the African CBI agreement has been interpreted by our own government, and we would very much like to engage very quickly the rationale that has led to what we believe to be a failure to properly follow the intent of the law in particular areas.

So moving from a general to a specific, we might as well roll up our sleeves and get to work. I want to thank you on behalf of the Committee, especially in terms of your knowledgeable and frank answers to a number of very specific questions without knowing what was going to be thrown at you. It clearly shows that the President has made an excellent choice. It will be our pleasure to work with you to make sure that the international competitiveness of the United States is enhanced. Thank you very much.

The hearing is adjourned.

[Whereupon, at 1:00 p.m., the hearing was adjourned.]

[Questions submitted by Messrs. Thomas, Crane, Jefferson, and Doggett, and Mr. Zoellick's response are as follows:]

Implementation of the Trade and Development Act of 2000

Question 1:

Last year, Congress passed provisions to expand trade with the Caribbean Basin and sub-Saharan Africa. Although scheduled to take effect on October 1, various elements of the program have been delayed and, in fact, some have still not been fully implemented. Can you give your assessment of the success of the program thus far (particularly in terms of increasing trade) and an outline of what you expect to do to ensure that the program becomes fully operational in a manner consistent with Congressional intent? Also, what are your plans to convene and promote the various trade meetings that Congress directed in the legislation?

 Answer 1:

I have been generally pleased with implementation of the Trade and Development Act since its enactment on May 18, 2000. Through an interagency process, chaired by the Office of the U.S. Trade Representative, 35 sub-Saharan African countries and 24 Caribbean Basin countries have been designated as beneficiary countries. In December 2000, over 1,800 products were designated as eligible for duty-free treatment under the enhanced Generalized System of Preferences (GSP) Program when produced in, and exported from, beneficiary sub-Saharan African countries. The GSP product review process normally takes one year, but was accelerated and completed in half that time in the case of AGOA.

We have determined that four of the designated beneficiary countries have satisfied the additional statutory criteria for eligibility for the AGOA's textile and apparel benefits. We are working closely with nine other countries that are seeking these benefits and expect that several of these countries will satisfy the criteria soon. These additional criteria - the adoption of an effective visa system and related customs laws or regulatory procedures - are important statutory safeguards against unlawful transshipment of textile apparel products. Implementation of these safeguards is a time-consuming process that has required a substantial amount of coordination between beneficiary countries and the U.S. Government. This effort has been complicated by the fact that as of May 2000 when the AGOA was enacted, none of the sub-Saharan African countries had an effective visa system to prevent unlawful transshipment.

I am meeting this month (April) with the diverse group of AGOA supporters to reaffirm the Administration's commitment to a strong Africa trade policy and to hear and exchange views on AGOA implementation and elements of U.S. trade policy. I am also meeting with the African Ambassadors Corps to exchange views on AGOA implementation and ways in which we can work cooperatively to strengthen our trading relationship with Africa.

With respect to CBI, twelve of the 24 designated beneficiary countries have met the customs-related requirements established in the legislation, and these countries are receiving benefits. While it is too soon to track statistical trends, we have anecdotal evidence that the new preferences in AGOA and CBI are being applied and that trade and investment in the relevant products are increasing.

Consistent with the AGOA, we are planning to hold the inaugural U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum this year. I look forward to joining the Secretaries of State, Treasury, and Commerce in hosting the Forum. I also look forward to convening a meeting with the CBI trade ministers, as provided for in the CBTPA, and hope to have such a meeting later this year.

Question 2:

What are your thoughts on how the United States, and your agency in particular, can facilitate greater participation by beneficiary countries in the African Growth and Opportunity (AGOA) program?

Answer 2:

The U.S. Government is working cooperatively with the eligible AGOA beneficiary countries to ensure they receive maximum benefits from the Act. We have a four-pronged approach. First, we have worked to ensure that information about the AGOA's benefits and requirements is readily available through extensive outreach to the African and U.S. private and public sectors. These efforts have included more than 10 regional workshops, a comprehensive AGOA implementation guide, an AGOA website, a customs workshop attended by over 90 African Customs officials, and U.S. Customs missions to five African countries. In addition, we work extensively on a daily basis with the countries seeking apparel benefits by providing guidance on the requirements that must be met to obtain these benefits. Second, we are encouraging sub-Saharan African governments to strengthen enabling economic and political reforms to complement the trade preferences accorded in AGOA. Third, we are helping to facilitate business-to-business linkages between U.S. and African companies including through assistance to trade missions. Lastly, we are working to provide additional trade capacity-building and related technical assistance through USAID.

I look forward to my meetings this month (April) with the African Ambassadors Corps and with a diverse group of AGOA supporters, in order to exchange views on AGOA implementation and explore ways that we may work cooperatively to strengthen our trade relationship.

Question 3:

Currently, there are a number of outstanding implementation issues which are impeding use of some of the apparel benefits under the AGOA as Congress had intended. For example, I was greatly disturbed to hear Customs deny preference for shipments from Mauritius because of an overly restrictive definition of what constitutes knit-to-shape

apparel. This is significant because knit-to-shape sweaters have been seen as a product that Africa could produce competitively. Has USTR taken a position on this issue? How can you ensure Congress that this program will be implemented as Congress had intended?

Answer 3:

U.S. Customs Service and other Treasury Department officials are reviewing comments they have received regarding U.S. Customs' interim rules. USTR's position is that the benefits of the AGOA should be made available to the full extent possible under the law and in a way that reflects the trade-liberalizing spirit of the Act. USTR has conveyed these views to appropriate U.S. Customs and other Treasury officials.

Question 4:

With respect to the CBI provisions, I have heard some disturbing reports that some eligible goods will be excluded from the program. These include goods knit-to-shape in the U.S. from U.S. yarn and finished in the CBI region or goods assembled in the CBI region from fabric that was cut in both the United States and the CBI. Can you tell me your plans to ensure that, as this program is implemented, these kinds of goods are not excluded?

Answer 4:

I understand that the U.S. Customs Service is considering revisions to the interim rules for the new CBI benefits, based on public comments. Issuance of final rules falls within the authority of the Treasury Department and the Customs Service. We support implementation of the Caribbean Basin Trade Partnership Act in a way which achieves the trade-expanding spirit of the legislation, and will continue to work with our counterparts at Treasury and Customs toward that end.

Question 5:

The Committee for the Implementation of Textile Agreements (CITA) recently issued its procedures for making yarn and fabric short supply determinations under the apparel provisions of the Africa and Caribbean trade initiatives. As drafted, these procedures appear to have ignored Congressional intent that the short supply process be fair and transparent. For example, under the procedures, CITA could deny a short supply petition based on business confidential information supplied by domestic producers, to which the petition would have no access or ability to comment. There is also nothing in the procedures as announced that ensures that a domestic producer that claims it can make a product in commercial quantities in a timely manner actually delivers on its assurances. What does the Administration plan to do to correct these deficiencies?

Answer 5:

On March 6, 2001, the Committee for the Implementation of Textile Agreements (CITA) published procedures for considering petitions under the short supply provisions of the Trade and Development Act of 2000. To date, no short supply decisions have been made under these procedures. Consistent with Executive Order 13191, the procedures are intended to ensure appropriate public participation in these decisions. CITA will announce the receipt of short supply petitions in the Federal Register and all interested parties are provided an opportunity to comment and provide relevant information. At the same time, however, the procedures protect sensitive business information. I understand that CITA will monitor and, if necessary, revise its procedures in light of its experience. As a CITA member, USTR office will seek to ensure maximum transparency in CITA decisionmaking.

Questions from Hon. Philip Crane:

Renewal of the Andean Trade Preferences Act

As you know, authorization for the Andean Trade Preference program expires on December 4, 2001. This program has proven to be a valuable weapon in the war against drugs, but more needs to be done. What can Congress do to enhance the ATPA so that the program will truly be effective in increasing trade and investment with these countries and better address the unique challenges that they face?

Answer:

The Administration shares your view that the ATPA program has helped strengthen the legitimate economies in the Andean countries and create viable alternatives to the drug trade, and we agree that more can be done. The Administration is conducting a review of the products previously excluded from eligibility for ATPA preferences in order to form a position on product coverage under a renewed ATPA. Congress can and should do the same. I look forward to working with you and other Members of Congress on this important legislation.

Sanctions Reform

I am preparing to reintroduce legislation that would establish a procedural framework for the consideration of future unilateral trade sanctions, including cost-benefit analysis and an opportunity for public comment. As you know, unilateral trade sanctions are rarely, if ever successful, but can have significant consequences for U.S. firms and workers in terms of lost trade opportunities. What are your views on this subject?

Answer:

In general, I am skeptical about the use of unilateral sanctions. Sanctions can be a significant foreign policy tool, but they must be used judiciously. If they are not used effectively, sanctions will hurt U.S. business, farmers, and workers. President Bush has also called for the exemption of food and medicine exports from new unilateral trade sanctions.

Question from Hon. William Jefferson:

The last USTR to visit sub-Saharan Africa was Mickey Kantor. I would like to challenge you to commit to a mission to Africa that will focus on the implementation of AGOA and on increasing U.S. capital flows to Africa. Would you consider such a trip in the near future?

Answer:

Early in my tenure, I contacted several African Trade Ministers by phone to initiate cooperative working relationships with them, and will be making more of such calls. This month, I am meeting with a group of AGOA supporters and with the sub-Saharan African Ambassadors of the African Diplomatic Corps to reaffirm the Administration's commitment to a strong Africa trade policy and to exchange views on ways to strengthen our trade and investment relationship. 

Expanding our trade and economic relations with the countries of sub-Saharan Africa is an important part of this Administration's trade agenda. I will seriously consider opportunities to visit the region. I visited Africa when I was with the State Department. If a trip to Africa would help us with the reform and trade opening process, I would be pleased to go.

Questions from Hon. Lloyd Doggett:

Question 1:

Please provide the Committee with a firm date by which you expect to re-issue the formal notice of an environmental review of trade negotiations for Agriculture and Services agreements within the World Trade Organization?

Answer 1:

On April 19, 2001 I sent to the Federal Register a notice initiating the environmental review of the WTO built-in agenda negotiations on agriculture and services.

Question 2:

Now that the quantitative analysis part of an environmental review of the Free Trade Area of the Americas (FTAA) appears to be underway, please provide the Committee with a firm time line of the implementation regarding legal and regulatory impacts on the environment.

Answer 2:

We have published a Federal Register Notice (FRN) initiating an environmental review of the FTAA. The FRN provided an outline for the scope of the review, and introduced a proposed quantitative methodology, which would, as a first step, identify some of the anticipated environmental effects associated with changes in the terms of trade in the hemisphere. We received numerous public responses to the FRN, some of them quite significant, and are currently assessing those responses as well as the scope of the review and the proposed methodology. The quantitative part, however, as your question points out, is only part of the process. The regulatory review is an important component of an analysis, and we anticipate that as the quantitative portion of the review proceeds, and the texts of the FTAA are further developed, the regulatory portion would be performed along a time line that would allow for the review to inform the negotiating process in a meaningful way. The recent decision in Buenos Aires at the FTAA Ministerial to release the consolidated negotiating text after the Quebec Summit only enhances the ability of the public to participate effectively in the environmental review.

Question 3:

Please provide the Committee with a copy of the U.S. negotiating proposals and the consolidated draft text of the FTAA, which has already been provided to hundreds of US advisors and to the other 33 countries involved.

Answer 3:

USTR has already provided both sets of texts to the Committee.

Question 4:

Do you agree that greater openness and opportunity for public participation in the operation of the World Trade Organization will assist in broadening public support for reducing trade barriers? What specific steps will you be taking to open panel dispute deliberations and meetings to the public, including observation, participation, and amicus curiae designation? What are the appropriate mechanisms to ensure citizen groups are represented at the same level as commercial interests?

Answer 4:

I share your view of the importance of greater openness at the WTO, and I agree that the benefits of open trade can only be achieved if we build public support for trade at home. This is a priority for the Bush Administration. With respect to dispute settlement proceedings, we continue to press our trading partners to agree to more openness in the proceedings, and at the same time we take steps on our own to make the process more transparent. For example, USTR seeks public comment, through a Federal Register notice, on every dispute settlement proceeding to which the United States is a party. We make our own written submissions to panels and the Appellate Body available to the public as soon as they are submitted, and we routinely request parties to all WTO cases to provide us with a copy of their submissions or non-confidential summaries for release to the public. We also release panel reports to the public on receipt; and as we pursue broader reforms, we have made a standing offer to all countries with which we have disputes (either as plaintiff or defendant) to open the panel meetings to the public.

To ensure that all interests are represented, we are committed to frequent consultation with all stakeholders and the sharing of information, where appropriate and consistent with our ability to advocate effectively the interests of the United States.

I would note that in the case of trade initiatives in the WTO, such as preparation for the upcoming ministerial meeting in Doha, Qatar, USTR has published, on behalf of the Trade Policy Staff Committee, a solicitation for public comment on our priorities for the meeting. This is one in a series of solicitations we have made with respect to the built-in agenda negotiations, and more recently on the question of WTO transparency and institutional reform. We routinely ask for comments in other WTO negotiations. For example, in the accession negotiations, we always seek public comment and publish notices in addition to meeting our other consultative requirements.

Question 5:

Do you believe that the environmental representatives on Industry Sector Advisory Committees (ISAC) 10 (Lumber and Wood Products) and ISAC 12 (Paper and Paper Products) have made a positive contribution to the US trade policy review and the advisory process?

Answer 5:

I am committed to ensuring that diverse stakeholders are represented in the formulation of trade policy. It is somewhat early to ascertain the impact of the environmental representatives on these two committees. ISAC-10 has only met twice and ISAC-12 has met three times since the environmental members were appointed in May 2000. ISAC-12 did recently issue a resolution recommending the elimination of paper tariffs in upcoming trade negotiations, with a business member consensus and a minority view from the environmental representative. I believe that it is useful for the government to receive broad-based advice from various stakeholders, even if this advice is sometimes conflicting.

As you may be aware, USTR and the Department of Commerce also recently announced that the two agencies will seek to appoint an environmental representative to another committee, ISAC-3 (Chemicals & Allied Products). This was in response to requests by environmental and other

non-governmental groups for greater participation in the development of U.S. trade policy, and specifically for participation on ISAC-3. Currently, an environmental representative from the Trade and Environment Policy Advisory Committee (TEPAC) is serving in an interim capacity on ISAC-3, until a permanent environmental member can be appointed.

I believe it is necessary for the Administration and Congress to work together to explore broader reforms to the existing trade advisory committee system, established by Congress under the Trade Act of 1974. I look forward to close consultations with Congress on this matter.

Question 6:

Since the Trade and Environment Policy Advisory Committee (TEPAC) has not met since November, how do you plan to make more effective use of this important advisory group? Do you plan to provide a more defined role, including regularly scheduled meetings, and a higher profile for the TEPAC?

Answer 6:

The TEPAC has played a very active role in advising USTR on a number of key policy issues related to trade and the environment. In 2000, the TEPAC met three times at the Member level and five times at the staff liaison level, and was also consulted several times by conference call. Last year, the TEPAC provided advice on environmental issues related to the Jordan FTA, the Singapore FTA, guidelines for the Executive Order on Environmental Reviews of Trade Agreements, the advisory committee review process, and other matters. In 2001, TEPAC has provided comments to USTR on the proposed methodology for quantitative analysis of the Free Trade Area of the Americas, and has also been included in discussions with cleared advisors on the Chile FTA. Over the past year, TEPAC Members have also sponsored a number of open public workshops on trade topics, attended by USTR and EPA staff, and we look forward to additional workshops in the future.

I intend to continue this important relationship with the TEPAC and look forward to regular meetings. Recently, Administrator Whitman and I met informally with a number of TEPAC members at their invitation, to hear their individual views and the trade and environment priorities of the organizations they represent.

Question 7:

How can monetary fines alone be sufficient sanctions to discourage labor and environment trade violations when you find such fines insufficient to sanction commercial violations?

Given the increasing diversity of our trading relationships, and the scope and variety of our trade agreements, we need to think creatively about how we can shape dispute resolution procedures to adapt them to the particular countries and commitments our agreements cover. Among other things, that means exploring the full range of methods available to secure compliance with dispute settlement panel decisions. One idea is to consider using monetary assessments instead of trade sanctions to enforce certain agreements.

In principle, there is no reason why monetary assessments could not be used to help secure compliance both with trade obligations and with labor, environmental, and other types of commitments that foreign governments may make to the United States. Like trade sanctions, the ability of monetary assessments to exert useful leverage will vary according to their size, the likelihood they actually will be applied, and the circumstances of a specific dispute. The key would be to set the assessment in a specific case at a level that would create the necessary incentive for the government concerned to bring its measures back into line with its obligations.

Monetary assessments have one clear advantage in the case of disputes over trade-related environmental or labor issues. The revenue generated from monetary assessments can be used for environment- and labor-related purposes.

The NAFTA supplemental agreements on labor and environmental cooperation, for example, provide for monetary assessments in case of non-compliance and call for the funds generated from those assessments to be used for environmental and labor purposes. The Canada - Chile agreements on labor and environment use a similar approach. By contrast, trade sanctions create additional trade barriers without necessarily advancing environmental protection or worker rights.

Question 8:

Now that you have had a chance to study investment issues, how can you ensure that investment protections in our trade agreements are not misused to undermine legitimate U.S. environmental and health laws and regulations?

Answer 8:

An important U.S. objective for international investment policy is to seek to ensure that investment provisions are not misused to undermine legitimate environmental and health laws. The investor protections that exist in U.S. investment agreements have continuously received bi-partisan support, but we recognize that concerns have been raised which threaten to weaken this support. For this reason, the Administration has a process to examine some of the controversial issues to see if changes should be made. In general, the protections in our investment agreements for U.S. investors abroad are intended to match the protections that are already provided to both domestic and foreign investors under U.S. law and therefore we are hopeful that we will not need to make substantial changes in investment provisions. While investors cannot be prevented from bringing unjustified claims, we are confident that such claims will not prevail and that our regulatory objectives will not be undermined.

Question 9:

How do you plan to implement environmental reviews of our trade agreements so that we can have objective information about the consequences not only within this country, but around the world?

Answer 9:

Executive Order 13141 provides that, as a general matter, environmental reviews will focus on impacts in the United States, but that, as appropriate and prudent, reviews may also examine global and transboundary impacts. We will seek to strike the proper balance in implementing the Executive Order for individual reviews, and we will consult with interested stakeholders to help us determine where the balance lies in a particular case. In implementing the reviews policy, I hope we can tap into a broad range of expertise, both inside and outside the government. In addition, we have been encouraging our trading partners to conduct their own environmental reviews, as Jordan did (with USAID support) and as Singapore has announced it will do.

Question 10:

Are you committed to ensuring that any future trade agreements revise existing dispute resolution processes which do not allow for public participation and observation? In the interim, are you committed to ending secret panel deliberations and instead implementing transparency in the dispute process where the other party is agreeable?

Answer 10:

I believe we should take every opportunity to encourage more openness and transparency, both when negotiating new dispute settlement provisions and in the context of individual disputes in which we are involved. Every time we are a party to a new WTO dispute, we urge the other parties to open the proceedings to public observation.

In dispute settlement proceedings arising under the U.S.-Jordan Free Trade Agreement, the two governments have agreed that our briefs will be made available to the public; panel hearings generally shall be open to members of the public; panels shall accept and consider amicus curiae submissions by entities with an interest in the outcome of the dispute; and panels shall release their reports to the public at the earliest possible time.

In addition, Jordan has agreed that if a dispute between the United States and Jordan arises over our respective WTO obligations, in any WTO panel proceedings we will make our briefs public and will seek the appointment of panelists who will agree to open hearings. We hope we can reach similar bilateral agreements with other WTO Members.

Question 11:

Are you willing to consult with Congress, cleared advisors, and interested parties before the U.S. makes any decisions to challenge foreign environmental, health, or safety regulations? If so, how will you accomplish this?

Answer 11:

USTR is committed to consulting with Congress, cleared advisors, and other interested parties in the development and implementation of U.S. trade policy, including with respect to dispute settlement proceedings regarding foreign environmental, health, or safety regulations.

USTR seeks public comment, through a Federal Register notice, on every matter involving the United States where a party has requested consultations, both where the United States is requesting consultations and where a U.S. measure is the subject of a request for consultations. We consider the comments that we receive prior to initiating dispute settlement proceedings and consult regularly with congressional staff and interested advisors at all stages of a dispute, and that will continue to be our practice.

[Questions submitted by Mr. Matsui, and Mr. Zoellick's response follows:]

1. During the enactment of the implementing legislation of the Uruguay Round, one of the issues that this committee debated was sovereignty. We included section 129 to address this issue. Has section 129 ever been used? Is there a current situation in which use of section 129 would be appropriate? If you choose not to use section 129 wouldn't an unfavorable trade precedent be set?

Answer:

Section 129 has been used by the Commerce Department to bring an antidumping determination into conformity with a WTO ruling, and on March 13, 2001, I requested the International Trade Commission to commence an inquiry under section 129 with regard to the WTO Appellate Body ruling that our Section 201 relief on wheat gluten is inconsistent with the WTO Agreement on Safeguards.

2. Specifically in terms of the wheat gluten case, if section 129 is not invoked are we sending a signal to the EU and other trading partners that we are not going to actively enforce our safeguard measures and that we are going to accept automatically WTO Appellate Body decisions? Shouldn't the ITC have a chance to cure the safeguard measure on wheat gluten?

Answer:

I have asked the ITC to issue an advisory report on whether Title II of the Trade Act permits the ITC to take steps in connection with the wheat gluten case that would render its action in that proceeding not inconsistent with the Appellate Body findings. It is required to issue such a report within 21 days, but I have asked that it be done as quickly as possible. If a majority of the ITC issues an affirmative report, we will consult with the Ways and Means Committee and the Finance Committee on the appropriate next step.

3. I am concerned that March 31, 2001, is fast approaching and there will be no final resolution with Canada concerning softwood lumber. President Bush is preparing to go to Quebec to discuss the Free Trade Area of the Americas with leaders from all over the hemisphere - asking our neighbors in the Western Hemisphere to adopt free trade policies. Before President Bush arrives in Quebec, shouldn't we consider free trade for softwood lumber and not merely repeat old claims that have been adjudicated in the past?

Answer:

The United States' basic policy is to support open markets for fairly traded goods, unencumbered and undistorted by government intervention. That is the principle upon which the NAFTA is founded, and what we aim to accomplish in the Free Trade Area of the Americas.

Since the 1980s, the United States has sought to persuade the Canadian provinces to reform their timber harvesting and forestry management practices. Unfortunately, the Canadian provinces have refused to move to more market-oriented practices, which has exacerbated cross-border tensions over trade in softwood lumber products.

Finally, U.S. trade remedy laws are expressly intended to permit U.S. industry to seek relief from injurious, unfairly traded imports. The U.S. industry claims that Canadian lumber is now sold in the United States at dumped prices, a claim they have not raised before. With regard to the claims of subsidization, our statute gives the U.S. industry the right to request another investigation regardless of whether certain issues may have been adjudicated in the past. Both factual circumstances and the legal framework for addressing them have changed since the previous lumber investigation, which preceded the completion of the Uruguay Round and the many changes that were implemented in U.S. countervailing duty law.

American Forest & Paper Association, statement

Advanced Medical Technology Association, statement

American Textile Manufacturers Institute, statement

Florida Department of Agriculture & Consumer Services, Tallahassee, FL, Terry L. Rhodes, statement

Matel Inc., El Segundo, CA, and St.Maxens & Company, Thomas F. St.Maxens, statement

National Conference of State Legislatures, and International Trade Committee, Bill Friend, letter and attachments

National Electrical Manufacturers Association, Rosslyn, VA, statement

Ranchers-Cattleman Action Legal Fund, Billings, MT, statement